Overall: The currency market saw a relatively weak dollar overnight after Bernanke's interview on CBS' 60 Minutes program, in which he said it was necessary for the Fed to print dollars because the economy was very weak and inflation was very low. After it was aired, traders sold the dollar both in the Asian and European sessions as S&P futures rose. The momentum carried into N.Y. as far as stocks were concerned, but the dollar was actually higher against the better yielders as the market declined off its peak after 12:30 EDT.
In U.S. economic news, manufacturing in the New York region weakened to the lowest level on record in March, the Federal Reserve Bank of New York said today. The index fell to a reading of -38.2 for the month, lower than the -31.5 economists had expected to see, and down sharply from the -34.7 seen in February.
Also, demand for U.S. financial assets declined in January as China made its smallest net purchase since June. Net sales of stocks, notes and bonds were -$43 billion after increasing by $34.7 billion in December, the Treasury Department said today.
Finally, industrial production fell for a fourth straight month in February, the Federal Reserve said today. Production decline by 1.4%, led by declining demand for autos and exports. Economists had expected to see production decline by 1.2%. January's number was revised to show a 1.9% decline, larger than the 1.8% reading originally reported. Factory capacity declined to 70.9%, the lowest level on record. Economists had expected to see capacity at 71.1%. January was revised lower to 71.9% from 72.0%.
The Euro (Eur/Usd) rose approximately 100 pips in the overnight session as the dollar was sold across the board, to just above the 50-day simple moving average where it also topped in the last two days of trading. Tonight was the fifth consecutive day in which the euro strengthened. The dollar looked to finish better against the euro during trading in N.Y. as stocks moved off their peak after 12:30 EDT.
Inflation rose in February to 1.2% from one-year earlier, in-line with the Flash CPI forecast. The strong declines in CPI sub-indexes helped the inflation gauge reach the 2% target much earlier than forecast. However, the core CPI rose more than expected, 1.7% vs. 1.6%. In February the inflation gauge rose for the first time in the last six months.
The Pound (Gbp/Usd) gained almost 250 pips from the session’s low in the overnight session. The pound advanced tonight for the fourth day in a row, as the positive European markets pulled the currency’s valuation higher. The pair was relatively flat in N.Y. with a slight gain as stocks declined off their peak of the day.
In the previous quarter, U.K. residential mortgage backed bond markets may remain shut throughout the rest of the year. This is mainly due to banks having to regain their footing amid the large losses they have faced. Meanwhile, the average asking price for a home has declined 9 percent this month from one year earlier. Buyers are struggling just to be able to obtain a home loan as the economy heads towards the worst contraction seen in the past 30 years.
The Rightmove house price index for the month increased to 0.9 percent, month over month, to an average asking price of 218,081 pounds in March. This follows a 1.2 percent increase seen during January. On an annualized basis, house prices have come down 9.0 percent, which is slightly lower than the 9.1 percent seen during February.
The Aussie (Aud/Usd) closed the Sunday gap with ease during the first part of the trading session and moved higher as S&P futures advanced. The pair was slightly better in N.Y. but fell off its high of the session as stocks declined in the afternoon.
The Cad (Usd/Cad) traded on light volume in the Asian session, but picked up momentum and managed to break below the neutral pivot point (1.2725) around the London open. In the first few days of the week, the cad has a relatively light economic calendar. The pair was slightly lower in N.Y. as crude gained 65 cents on the day.
The Swissy (Usd/Chf) was very reluctant in the overnight market to move anywhere lower, even though the rest of the major currencies posted strong gains against the dollar. This happens, as the Swiss National Bank is trying to devalue the currency. The pair looked to close slightly higher in N.Y. as stocks fell well off their highs.
The Yen (Usd/Yen) rose steadily in the overnight and into N.Y. as well, losing momentum in the last 2 hours as stocks came off their best levels of the day. The pair still looked to close at the highest level since Feb. 11.