- ISM manufacturing index rises to 42.8 from 40.1; new orders index rises to 51.1, first positive reading in 17 months
- US construction spending rises 0.8%; much firmer than expected
- US personal income rises 0.5%; spending falls 0.1%; savings rate rises to 5.7%; core PCI rises 0.3%- no sign of deflation
- Canadian GDP falls 5.4% in Q1, falls less than expected
- Qatar should diversify reserves, rethink dollar peg; Gov’t adviser
- S&P 500 index breaks above 200 day moving average decisively, closes up 2.6%
- Commodities soar; Oil up 3%, copper up 5%, CRB up 30% from lows
EUR/USD consolidated the collasal gains made in London this morning but was unable to make additional headway in the States. It sold off sharply from each of its three forays into the 1.4220s and 30s during NY trade. Sovereign demand was spotted on dips to 1.4150 in the afternoon
Some of the EUR sales were linked to the crosses, particularly EUR/GBP which fell to fresh 2009 lows today. GBP/JPY was a huge mover as both legs of the cross rallied strongly late in Europe and into the US afternoon. On the US session, GBP/JPY rose over 4 handles to 159.15. USD/JPY rallied to 96.80 from 94.45 catching the market short intraday.The 200 day moving average at 97.05 looms overhead, keeping the market range-bound until it is cleared.
AUD was underpinned by the commodities gains but as with many of the pairings today, dealers were very quick to book profits once topside momentum stalled. Traders want to be long but also are deadly afraid of being caught long at the highs.
If the weak dollar trend is to break down, a decoupling of the reflation trade may give us the clearest signal. If stocks and commodities continue higher but the dollar shows some strength, it could be a sign that the market is short-enough dollars near term and needs a purge of currency longs to get markets back in better balance. Don’t fade the weak dollar trend though. It is too early for that.