The beleaguered dollar found no reprieve in the Wednesday session, extending its losses to fresh 14-month lows against the euro and Australian dollar to 1.4934 and 0.9156, respectively. A shift to riskier assets was triggered by a stronger than expected earnings report from JP Morgan Chase, prompting advances in the US equity bourses with the Dow Jones, Nasdaq and S&P 500 all gaining by more than 1.2% by afternoon trading. The Dow Jones edged higher toward the psychologically key 10,000-level, briefly breaching above it on an intra-day basis for the first time in a year.
The economic data released earlier in the session were largely mixed, consisting of retail sales, import prices, export prices and business inventories. The headline retail sales figure was better than estimated, albeit still declining by 1.5% for September versus a 2.7% from August. The excluding automobiles retail sales figure beat consensus estimates also, posting an increase of 0.5%, better than calls for a 0.2% increase from 1.1% a month earlier. The August business inventories figure revealed a 1.5% drop from a 1.0% decline in July.
The minutes of the FOMC's September meeting revealed that some policymakers felt increasing the scale of Fed's asset purchases would improve the recovery, stressing the importance of ability to increase asset purchases if the economic outlook worsened. The Fed minutes said that policymakers judged costs of growth being weaker than anticipated could be relatively high while expecting inflation to remain subdued for some time amid substantial resource slack. The Fed also raised its economic projections for the second half of 2009 and subsequent years.
The calendar for Thursday will see a barrage of key reports, including weekly jobless claims, September CPI, October NY Fed manufacturing survey and the October Philadelphia Fed business index. The headline CPI figures for September are seen increasing by 0.2% on a monthly basis and lower by 1.4% on an annualized basis. The core CPI readings are expected to increase by 0.1% m/m and 1.4% y/y. Meanwhile, the October Philadelphia Fed manufacturing survey is expected to slip to 12.0 from a 14.1 reading in September.
EURUSD continues to trade near its highest levels since August 2008 above the 1.49-handle. Resistance is seen at 1.4950, followed by 1.4980 and 1.50. Subsequent ceilings are eyed at 1.5040, backed by 1.5070 and 1.51. On the downside, support starts at 1.49, followed by 1.4860 and 1.4820. Additional floors are eyed at 1.48, backed by 1.4750 and 1.47.