The greenback become the biggest loser against major counterparts overnight, as key economic data heightened investor concern the US economy may endure a double-dip recession. The usual risk-adverse dive to the low yielding USD was nowhere to be seen as key employment, manufacturing and housing data failed to reach estimates.
Economic data from the US saw the number of new applicants for unemployment benefits rose to 472,000 for the week ending June 26. Yet another sign the unemployment situation in the US remains a critical stumbling block for the US economy.
Yesterday a private measure of employment in the US also failed to provide investors re-assurance the jobs market is rebounding. The ADP employment change recorded 13,000 new jobs in June, less than the 60,000 forecast. Both indicators released are seen by the market as a precursor to Friday’s non-farm payrolls in the states which are expected to show 110,000 job cuts in June after the Census Bureau let go about 243,000 workers.
The ISM Manufacturing index failed to meet forecast with the index falling to 56.2 in June against a previous 59.7. Estimates suggested a more subdued fall to 59. ISM Price paid slumped to 57 from a previous 72. Pending home sales were hit hard in May with the key index sliding 30 percent against a previous 6 percent rise. Economist had expected fall of 15.2 percent.
As a result, the balance of risk fell to the Euro and Sterling with the Japanese yen also a primary beneficiary recording the strongest levels against the USD since September last year. Sterling resumed an upward trajectory after falling below US$1.49 yesterday. The pound rose to highs of US$1.5190 and remains buoyant at US$1.5170. The Euro also found strength as investors shunned the US currency – with the momentum forcing those caught short to buy back positions, allowing the currency to rise to highs of US$1.2540.
By default, US dollar weakness also assisted north bound movements from the Aussie dollar which rose to highs of 84.8 US cents. We can also attribute some of the steam behind the Aussie overnight as reports resonated through the market place a deal had been struck by the Government pertaining to the controversial resource super profits tax. This morning the Gillard government announced it had reached an agreement with mining heavy weights to slash the tax rate, lower the threshold and reduce the resources affected. At the time of writing the Aussie is buying 84.6 US cents – in the absence of local economic feedback, we can expect the local unit to be governed by local equities and Asian markets as they open for business.