The US dollar recovered from yesterday’s record breaking loss against the euro, but fell to a 26 year low against the Australian dollar as Australia’s core inflation surged to a 17 year high. As a result, the New Zealand dollar advanced as well as the pair traded in the 0.79 range, while the Canadian dollar continued to stack up losses as Canadian Retail Sales dipped for the first time in five months. Against the European currencies, the US dollar advanced against both the euro and British Pound as the pairs fell to 1.58 and 1.98, respectively. As the session came to a close, the US dollar picked up the biggest gains against the low yielding Swiss franc as investors raised their risk appetite, with the Yen also losing ground as the pair rose to 103.50.
Accelerating food prices have become a major concern for the global economy, with market conditions looking worse as World Bank officials raised concerns that Thailand, the world’s largest exporter of rice, may decide to curb global exports amid skyrocketing prices. Neighboring countries, such as China, Vietnam, and India, have already cut back on global exports as a means to protect domestic supplies, and led prices to more than double over the past year. Fresh economic concerns have also surfaced in the UK as a three-way split among the Bank of England’s policy makers spurred transparency issues, and lowered growth prospects as the divide among the central bankers creates a greater setback in stabilizing the economy. As 7 of the 9 members remain focused on reviving growth for Europe’s second largest economy, market participants continue to raise bets that the central bank will take further steps similar to the Fed in order to ease financial constraints, and speculate that the Bank of England may lean towards another rate cut next month.
Mixed price actions stirred the stock markets ahead of Apple’s earnings report, with Boeing adding to the mix as they announced a 38 percent gain in profits. By the end of the session, the DJIA advanced 42.99 points to 12,763.22 points, with Boeing and Microsoft topping the winners. Among the broader indices, the S&P500 rose 3.99 points to 1,379.93 points amid 223 stocks falling to a new 52 week low.
A rise in risk appetite left US Treasuries struggling to stay afloat, with treasury prices trailing lower as investors fled the safe haven of risk free bonds in hopes of finding greater returns. As a result, the benchmark 10-Year yield rose to 3.745 percent from 3.695 percent, while the 2-Year yield jumped to 2.210 percent from 2.193 percent.
Looking ahead, the Durable Goods Orders index will kick off the morning at 12:30 GMT, and will be followed by the New Home Sales Data at 14:00 GMT. We expect the rise in US exports to lift the durable goods orders to 0.1 percent from minus 1.7 percent, but expect the housing turmoil to persist as we forecast new homes sales to fall 1.0 percent.
