The greenback fell broadly against major currencies after the release of unexpected weak New York manufacturing data and the declining consumer confidence added to concern, adding concern that the U.S. economy is headed for a recession.
The New York Fed's general economic index fell to minus 11.7 this month (forecast was 6.0), signaling a contraction for the first time in almost three years, from 9 in January. The Reuters/University of Michigan index of consumer sentiment dropped to 69.6, the lowest since 1992, from January's 78.4.
Foreign demand for U.S. securities waned in December. International investors bought a net $56.5 billion of U.S. securities in December, down from an addition of $90.9 billion the prior month. U.S. import prices rose by 1.7% in January, more than economists’ expectation of a 0.5% rise, mainly due to the result of high food and energy costs.
Interest-rate futures showed a 68% chance the Federal Reserve will lower its target for overnight lending between banks by 0.5% to 2.5% at its next scheduled meeting on March 18.
European Central Bank President Jean-Claude Trichet said on Friday the 15-nation region still has ‘ongoing growth’. Two- year U.S. Treasury notes yield 119 basis points less than similar-maturity German government debt, up from 116 basis points a week ago The single currency rallied to from 1.4631 to 1.4710 versus the dollar.
The British pound tumbled from 1.9721 to 1.9580 on active cross selling in sterling especially versus euro. Euro rose against sterling from 0.7431 to 0.7493. The greenback tumbled against the Japanese yen and Swiss franc from 108.32 to 107.27 and from 1.0987 to 1.0886 respectively. However, U.S. currency rallied versus the Canadian dollar from 0.9919 to 1.0115 after a report showed Canada’s factory shipments dropped by 3.4% in December (forecast was a decrease of 0.1%), the most in 4 1/2 years.
Next week will see the release of Japan’s tertiary industry index, U.K. Rightmove house prices and Japan leading’s indicators on Monday; Canada’s CPI and wholesale trade and U.S. NAHB housing market index on Tuesday; German PPI, Bank of England vote outcome, U.K. CBI industrial trend and U.S. CPI. housing starts, building permits and real earnings on Wednesday; Japan’s all industry index and trade balance, eurozone current accounts, U.K. retail sales, U.S. jobless claims, Philadelphia Fed survey and leading indicators on Thursday; and eurzone PMI manufacturing and industrial orders on Friday.