It seems dollar traders were uncomfortable with sitting on major technical levels just before the release of first quarter gross domestic product. With minimal interference from the economic docket Thursday, bulls finally found their relief rally and changed the landscape for Fridays action.
Across the majors, no pull back was more appreciated by greenback bulls than that of EURUSD. Since marking a new intraday record high at 1.3370, the pair has fallen 85 points to 1.3585, where mild support pressure started to build. On a triple top, GBPUSD fell steadily beginning in the late Asian session from 2.0065 to 1.9890. The dollar move upset the steady range in USDJPY when the pair quickly moved above 119 on its way to 119.60. Finally, the Swiss franc has relaxed its advance, allowing USDCHF to rally to 1.2100 from its range low 1.2000 set in the previous two sessions.
There was little to rock the boat this morning in the US economic calendar; though the few lower rung indicators it did hold may prove useful for speculation next week. Post-GDP, the market will be put into another countdown to a key release. Next Friday, the infamous non-farm payrolls report will cross the wires. And, depending on how first quarter growth shapes up, labor trends could take on a new level of importance in the months ahead as policy makers question the strength of the consumer sector. Officials and economists are already keeping a close eye on employment since payroll growth has stabilized somewhat in the past quarter. This mornings jobless claims numbers and Help Wanted index have done little to clear the air for speculation. First time filings for unemployment benefits dropped 20,000 in the week ending April 21st to 321,000. This was the lowest overall annual pace level of filings in a month and was consequently well below expectations. Eroding some of the confidence this report may have instilled, the market had to also consider the less volatile four-week moving average which rose for the third consecutive month to 332,000. At the same time, the Conference Boards Help Wanted Index added another tick to the pessimist column. Though it is a lagging March gauge, the survey of job ads in major US papers slipped to a five-month low 30. While neither of these indicators is particularly accurate in predicting the governments monthly employment numbers, they certainly add another dimension to forecasts.
Before FX traders concern themselves with NFPs-Friday, though, tomorrows GDP report promises the single greatest piece of event risk the US calendar has seen in some time. The worlds largest economy has slowed considerably in the past year and it is expected to have cooled even more over the first three months of this year. The Bloomberg consensus is calling for a 1.8 percent print from the annualized figure - compared to the 2.5 percent pace in the fourth quarter of 2006. Should the indicator print in line with expectations or disappoint, it would likely redouble doves efforts in encouraging the Federal Open Market Committee ease of up on the reins and cut interest rates.
The celebration in equity markets seemed to wind down quickly as participants switched gears from gunning a psychological level to once again finding the fundamental support for a sustained bullish cycle. By 15:00 GMT, the Dow Jones Industrial Average was trading 0.21 percent above the open at 13,117.77. At the same time the NASDAQ Composite rose 0.2 percent to 2,553.11 while the S&P 500 was marginally higher at 1,495.70. As investors donned their rational caps, they were supplied with a number of big earnings releases. Apple, the PC giant and aspiring electronic conglomerate, reported an 88 percent increase in profits on the back of iPod sales. Well beyond expectations, the accounting numbers sent Apple shares $4.50 or 4.7 percent higher to $99.85. Proving that earnings dont have to be positive to encourage optimism, Ford Motors announced a smaller than expected loss for the quarter. Ford shares were trading 4.6 percent higher at $8.24 on the news.
Its coming down to the wire for treasury traders, and they were certainly anchoring price action before tomorrows data alters interest rate expectations. The T-note was off 5/32nds at 99-20 by 15:00 GMT as its yield grew 2 basis point 4.670. At the same time, the thirty-year bond was quoted 12/32nds off the open at 98-10 while its yield tacked on 2 basis points to 4.857.