The Japanese yen relinquished some of its recent strength versus the greenback in the Wednesday session, shedding almost 1%. Meanwhile, the major currencies were marginally higher against the dollar, with the British pound edging up by 0.35%. US equities also recouped from earlier losses, finishing slightly higher as the Dow Jones recovered above the 10k-level. Crude oil also climbed higher, stemming its steep losses in recent weeks to trade higher by 1.7% to $72.83-per barrel while spot gold firmed by 0.8% to settle at $1,240-per ounce.
Data continues to reflect further deterioration in the US housing market, adding to the recent string of dismal economic reports and raising fears for a double-dip recession. The July new home sales report sharply missed consensus estimates for a flat reading, instead plunging by 12.4% to a record low at 276k units compared with a downwardly revised 12.1% reading from June at 315k units. The home price indexes were mixed with the Q2 home purchase price index increasing by 0.9% and beating estimates for a decline of 0.4% from a 2.1% drop in the previous quarter. On a monthly basis, the home price index declined by 0.3% versus a 0.5% increase previously. Durable goods orders were also softer than anticipated, with the headline index improving by 0.3% and missing calls for a 3.0% increase while the excluding transportations index printed sharply weekly, down 3.8% versus a marginal 0.2% increase previously.
Amid increased fears for a double-dip recession, traders will continue to focus on the dataflow. The key highlight for the Thursday session will be weekly jobless claims, expected to improve slightly to 490k following the unexpected jump last week to the 500k-mark.
Increased risk-aversion continues to be the key driver in the foreign exchange market, with the Swiss franc and Japanese yen reaping the lion's share of the safe-haven flows. The Swiss franc jumped to its highest level against the euro following S&P's sovereign credit downgrade of Ireland and reinforcing concerns over the Eurozone debt crisis.
Markets will also look ahead to Fed Chairman Bernanke's speech at Economic Summit in Jackson Hole on Friday. Bernanke is expected to discuss the Economic Outlook and the Federal Reserve's Policy Response. Given the increased worries over a double-dip recession and the recent bout of disappointing economic reports, markets will closely scrutinize Bernanke's comments for clues as to whether to Fed will need to implement further quantitative easing to stave off additional deterioration in economic fundamentals.