Overall: The market sold the dollar in the first half of the overnight session, with the pound reaching the 50% retracement of the decline from Jan 16 to the low made on Jan. 23 as it rebounded from last week's mini-crisis. Stocks rose early in N.Y. but spent most of the day in a narrow range, and currencies followed the same pattern. In U.S. economic news, home prices in 20 major metropolitan areas fell at a record pace according to the S&P/Case-Schiller home price index. Prices in the survey declined 18.2% in the year to November as foreclosures rose and sales declined. Consumer confidence fell to the lowest level on record, the Conference Board said, as the job market weakened and values of homes and retirement portfolios continued to decline. The overall index fell to 37.7 this month, down from 38.6 in December.
The Euro (Eur/Usd) tested the 1.33 area in the Asian session. The pair rose nearly 120 pips overnight, but retraced most of the move just below the 50-day moving average. The pair fell below the DAX opening level as N.Y. began trading, and remained there as stocks stayed flat and oil declined.
The Euro-area current account was released at -16.0B, much worse than analysts' expectations. The previously released number, for the month of October, was revised slightly lower to -6.0B. The German IFO business climate rose to 83.0, more than the market had expected. This was the first time in the last half of year the German business expectations has improved.
In December, German import prices tumbled 4.0%, subsequent to the record pace it has risen in the first part of 2008. The released number of -4.0% is larger than analysts' expectations of -2.9%. From December 2007, the index is down 5.1%, pointing to deflation
The Pound (Gbp/Usd) rallied again in the overnight session, rising nearly 500 pips this week. In addition, the pair also broke above the 1.40 area tonight, the high of the last few days of trading. The pound declined to the DAX opening price heading into N.Y. but unlike the euro, was able to maintain above the level. The pound also gained about 100 pips on the euro as the mini-crisis eased.
The Aussie (Aud/Usd) gained 70 pips in Asia, just below the 50-day simple moving average and TheLFB R1 (0.6680). As with the other majors, the pair was basically flat in N.Y. as stocks held steady.
Producer prices in Australia increased by 1.3 percent in the fourth quarter of 2008. This was mainly due to price increases in the industrial machinery and equipment manufacturing, electronic equipment manufacturing, and other transport equipment manufacturing. The National Australia Bank released the business confidence report this evening. Business confidence in Australia has fallen to -20, which is slightly better than the previous reading of -30. Consumer spending has risen slightly helping the index to rise as the effects of a government stimulus package, as well as aggressive interest rate cuts filter to the economy
The Cad (Usd/Cad) traded mostly higher in N.Y. as oil declined on the day when the contago narrowed after it had retraced 61.8% of the last upside swing from Jan. 08 to Jan. 21 on Monday.
The Swissy (Usd/Chf) range-traded in Europe and N.Y., finishing the day with a doji on the daily chart.
The Swiss Consumption Indicator improved slightly in December. The indicator rose to 1.15, after hitting a 3 year low last month. The prospects are, however, becoming increasingly gloomy. Due to the economic downturn, unemployment is set to rise in the coming months, which will have a negative effect on consumer spending
The Yen (Usd/Yen) broke above the 89.50 resistance level in the European session, and advanced another 60 pips. The pair formed a head and shoulder pattern on the 15 minute chart over a two hour period, with resistance established at 89.17
The Japanese corporate services price index fell to -2.5 percent for the month, making this the third month in a row to show a decline as oil and commodities prices fall and the nation enters a recession. The advancing yen has been eroding corporate profits of exporters, which is forcing them to cut costs. Many corporations are reducing production while curtailing the workforce.