Despite extremely weak economic data to open the New Year, the dollar managed to gain against some of the majors. The EurUsd dropped over 180pips to mid range of 1.38, while the UsdJpy surged 150pips trading through previous resistance of 92. The GbpUsd fell 165pips to the low 1.45 level testing parity with the Euro over the last week. Equity markets finished convincingly positive in the US and Europe, with the Dow up 2.94% or 258pts. Bond yields rose across the curve, with the 10yr higher by 18bps and the 30yr up 14bps. Commodities were mixed with oil up nearly 4% to $46bbl, while gold was marginally lower at $875oz.
Housing data continues to plague the UK, with mortgage approvals at their lowest level since 1999. Mortgage approvals came in worst than expected at 27k vs. 32k, which was consistent with the decline in actual home prices. With the lack of available credit, home prices are subject to further downside. The HBOS House Price index fell 2.2% as opposed to the estimated figure of ‐1.6%. The sterling retracted sharply on this news, as investors are watching the credit sector very carefully in timing a recovery. In the Eurozone, PMI manufacturing data was released at 33.9 vs. 34.5. The euro also gave up over 100pips against the dollar, but managed to maintain strength against the cable. The dollar was resilient against most of the major currency pairs, but underlying weak economic fundamentals persists in the marketplace. US ISM data fell to its lowest level on record (1949), which served as somewhat of an obstacle to bullish Traders in the early part of the session. Even though ISM number was alarmingly weak, stocks managed to garner decent upward momentum. We still have time before normal volume resumes, but in the interim FX prices are subject to heightened volatility which may cause erratic price swings.