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USD - In what appears to be a recurring phenomenon, the greenback was once again tossed to-and-fro by the winds of economic news and risk sentiment throughout last week and this morning. A barrage of key data releases last week had market participants frantically searching for direction and a firm footing for the dollar. The opening of the week ushered-in sanguine news lending credence to the notion of a gradual, yet steady recovery, while the latter half brought with it ominous signs that suggest a potential fragility in the much-hoped-about economic rebound. ISM Manufacturing and Prices Paid showed an impressive mprovement m/m (55.7 and 65.0 in Oct., respectively), while Factory Orders surged (+0.9% in Sep. vs. -0.8% prior). The FOMC rate announcement last Wednesday, while coming in as expected (no change to Fed Funds range of 0% to 0.25%), cast a shadow of doubt upon the nascent US economic optimism, as the Fed confirmed interest rates would remain "at exceptionally low levels" for an "extended length of time". Fed Funds Futures were showing a 53% chance of a 25-bps rate hike in June 2010 last Thursday. The ensuing data releases, as if taking their cue from the dovish Fed rhetoric, proved disappointing, ultimately stoking the flames of market risk aversion. US NFP printed worse-than-expected (-190K in Oct. vs. -175K exp.); furthermore, the headline unemployment rate surged up to 10.2% (9.8% prior)-the worst level since 1983. With a light economic calendar this week, and thin trading conditions expected with the US Veteran's Day holiday mid-week, the currency market is likely to take its cue from the equity markets. The DJIA is back above the psychologically and technically significant 10,000-level, which suggests that risk appetite is back in-vogue-a negative development for the USD.
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