The currency markets continued to keep pace with the risk trade and this elicited yet another wild NY session in terms of price action. Equities opened deep in the red as US economic data continued to print on the ugly side. The durable goods report was extremely disappointing as the core number that feeds directly into GDP (non-defense capital goods excluding aircraft) sank nearly -3% on the month. Meanwhile, initial jobless claims jumped to 496K from 474K and were well above the consensus guesstimate. The poor reports are on the heels of downright disastrous consumer confidence and new home sales numbers earlier in the week.
The initial risk off tone sent the yen crosses much lower. EUR/JPY dropped to a session low near 119.70 after an open near the 120.70 zone. USD/JPY sank from an open by 89.50 to a low near 88.80 as well. Both eventually pared losses as the US equity market recovered in late NY trading. Apparently all it took to shake the market out of the slump was news that Apple will potentially be doing a 4-to-1 stock split. The late-day surge sent the yen crosses back towards their NY open levels.
The commodity complex witnessed similar price action, tied to the overall tone to risk. The one standout was clearly gold (XAU/USD). The precious metal rocketed from a session low near $1089 to a high near $1109 as the close approached. The rumor mill was churning on this front and reports that China will buy the IMF's remaining stash sent the commodity flying. However, the reaction seems a bit knee-jerk and overdone. If China were to buy the IMF's gold, it would likely be an off-market transaction and thus not disrupt the supply/demand balance. Be on the lookout for potential denials of this rumor as we head into the weekend - news that could send gold much lower in the short-term.