Today’s volatile trading session caused mixed reactions for the US dollar amid better-than-expected retail sales figures, and helped the US dollar retrace some of its losses from yesterday. The Euro struggled today amid fading speculation of a rate cut by the ECB did not support the currency, while the Pound Sterling surged past 1.9600 as unemployment fell to a 33 year record low. The Yen came out as the biggest loser as it fell to a monthly low to trade well into 108.00 as newly released data reflected a jump in bankruptcies with consumer confidence hitting a four year low. Commodity currencies came out mixed in the volatile session as the US dollar strengthened against the Australian and the New Zealand dollar, while the Canadian dollar was able to hold up against the US dollar.
Advanced Retail Sales helped to lift spirits today as it unexpectedly rebounded from -0.4 percent to 0.3 percent, indicating that consumer spending continues to hold up despite a slowdown in the economy. The surge in sales hit investors as a big surprise following yesterday’s release of the ABC Consumer Confidence which fell deeper into negative territory. This raised concerns that consumer spending may soon follow the downward trend, but it didn’t. Meanwhile the MBA Mortgage Application data hindered US sentiment as it fell 2.1 percent from the prior week, providing further confirmation that the US will continue to battle tightening credit conditions along with the housing crisis. Rebates to US taxpayers have also been extended as President Bush signed a $168B stimulus packaged that will lighten the tax burden on businesses.
The stock markets climbed for the third consecutive day as the improvement in retail sales helped to restore confidence in the US. The DJIA surged 178.83 points to reach 12,552.24 points, with 27 of the big 30 advancing, led by American Express as shares jumped 3.82 percent. Coca cola was the leading loser out of the big 30 amid a quarterly report reflecting a 79 percent growth in profits. The broader S&P500 also advanced as it rose a modest 18.35 points to reach 1,367.21.Tech stocks rallied today, led by Applied Materials Inc. as shares jumped 10.2 percent, with Yahoo, Google, and Microsoft following as their shares soaked in minor gains.
US Treasuries fell as positive economic data reduced the attractiveness of the risk-free investments, and increase the risk appetite of investors. Bond prices were pushed down as the 10-Year yield rose to 3.72 percent, while the 2-Year yield rose to 1.91 percent. For tomorrow, the Bank of Japan rate decision will be the main focus as we forecast the central bank to hold rates at 0.50 percent. Other areas of focus for tomorrow include the GDP figures for the Germany as well as the EZ, and the New Zealand Retail Sales Index.
