Euro surged across the board on Thursday as Spain's auction of bonds was met with strong demand. ECB's 3-month tender showed on Wednesday European banks borrowed less money than expected and that also eased investors' worries over the banks' funding issues. Dollar fell broadly as disappointing U.S. economic data stoked worries of double-dip recession.
Although the weak China's PMI index prompted traders to sell euro versus most major currencies on risk aversion initially and price fell to 1.2193 in Asia, the single currency rebounded from there and later surged above 1.2490 to 1.2541 in NY afternoon on active short-covering due to a good Spanish bond auction. Spain sold 3.5 billion euros of a 5-year bond on Thursday at the top end of the Treasury's target amount. Euro also drew support as European banks only borrowed 111.237 billion euros from ECB in 6-day operation at fixed rate of 1.0%. Cross-buying in euro also lifted price as eur/chf skyrocketed from its fresh record low of 1.3073 to 1.3402 due to speculation of SNB's intervention while eur/jpy rose from 107.50 to 109.81.
Versus the Japanese yen, the greenback fell to a 7-month low on Thursday on poor economic data of US and China, which added to investors' uncertainty about the global economic recovery. Despite early rise to 88.57, the pair fell from there and the greenback extended intra-day decline after the release of higher-than-expected U.S. weekly jobless claims data which rose to 472,000 versus the economists' expectation of 452,000. The pair's fall picked up more downward momentum after the release of weaker-than-expected US ISM Manufacturing index and pending home sales data. The pair tumbled to 86.96 in NY mid-day before recovering.
On economic front, U.S. ISM Manufacturing index in June came in at 56.2, lower than the forecast of 59.0 and the previous reading of 59.7 in May. Pending home sales in may slumped by 30% versus the the estimation of -15.2% and the increase of 6.0% in April.
Market brushed off the early surprise Tankan large manufacturers' survey which rose to a 2-year high of +1 versus forecast of -4 as the lower-than-expected China's June PMI (52.1 vs forecast of 53.1 and 53.9 in May) spooked investors as the world's 3rd largest economy would slow down due to comments by China Stats Bureau following the PMI release that the country's export outlook would be grim and drop in PMI reflected government's tightening policies and slower global recovery.
Commodities prices declined on Thursday as weak economic data of US and China suggests global economic recovery remained fragile. Spot gold declined from 1244.00 to 1196.80 while U.S. crude for August delivery fell $2.68 or 3.54% to settle at 72.95 a barrel. Commodity-linked-currencies also fell sharply as aud/usd and nzd/usd once dropped to 0.8315 and 0.6795 but the pairs rebounded strongly to 0.8449 and 0.6919 respectively in tandem with euro.
Global stocks also weakened as FTSE 100 ended the day down by 2.36%, CAC 40 fell by 2.99%, DAX dropped by 1.81% and DJI pared most of its early losses and closed the day down by only 0.42% at 9732.53.
The closely eyed U.S. non-farm payrolls in June would be released on Friday.
Economic data to be released on Friday include: EU PPI , Employment , U.S. Avg. hourly earnings , Non-farm payrolls , Unemployment rate , Factory orders, revised durable goods.