Today's US data helped to stem some risk aversion coming overnight that had weakened the Euro and sent Yen higher against its major counterparts. The soft tone to riskier assets came about as the Fed downgraded its assessment of the US economy and US new home sales fell sharply.
The FOMC meeting pressured the greenback because it means that low interest rates will remain for longer, which lower yields for US Treasuries. That makes greenbacks less attractive. It also opens the door to further carry trade using the Dollar as a funding currency. Carry trade means borrowing in low yielding currency like US Dollar or Yen and seeking higher returns abroad in countries with higher interest rates such as Australia.
To open NY trading there were two bits of data from the US - jobless claims and durable goods orders.
Initial claims for jobless benefits fell by 19K to 457K, that moves claims down from a two month high and was better than the 7K decrease expected by economists.
In the larger scheme of things, jobless claims have been moving sideways this year, stuck in a range between 450K and 480K, a level consistent with job growth that will not do much to lower the unemployment rate.
Durable goods orders meanwhile fell in May by 1.1%, which had followed 5 consecutive months of gains. The figure is slightly misleading. Taking away transportation, which includes cars and planes, durables were up 0.9%. In April aircraft orders jumped 216% while in May those orders were down 30%. That makes up for the large difference in the transportation sector.
In a closely watched indicator of capital spending - orders of non-defense capital goods excluding aircraft - the news was good as it increased 2.1% in May after falling 2.7% in April. Over the past three this indicator of orders has climbed at a 29% annual pace, up from 21% in April. That is a sign that companies are ramping up investment in machinery in anticipation of increased production.
The two pieces of data, taken together show that the labor market tightened somewhat after loosening the past few weeks, and that manufacturing continues to see activity gains.
Still, US equities were pressured in early morning trading following the data as the FOMC statement, the general weakness in the US labor market, and problems from the Euro-zone banking sector create a bearish environment.
In the currency markets, that meant the Yen was a strong performer.
The USD/JPY fell to a one month low near 89.25 after breaking below the 90.90 level at the end of last week. That takes away most of hte gains seen in the pair from late May. Importnat support comes at the 88.70 area.
Commodity currencies felt the pressure overnight as a result of risk aversion.
The USD/CAD for instance extended its gains in favor of the greenback, pushing to retest its highs from yesterday near 1.0460. The implication is that with the US economic recovery weakening, global growth will slow. That will mean less demand for commodities, which saw their prices decline today.