Dollar Moves Stifled With A Fundamental Overload

Once again, the peak of activity from the economic calendar has not translated into clear dollar moves. In Thursday’s New York session, market participants digested the PPI, TICS and Empire manufacturing indicators – all top market movers in their own right and yet comparatively impotent in current market conditions.

Tracking the path of EURUSD, the pair broke out of a very-tight range in the Asian session only to broaden its barriers to 60 points below 1.3250. Influenced by a heavily priced in SNB hike, USDCHF retraced advances from 1.2210, though support around 1.2135 seems to be putting in a floor once again. After its big move in the US session yesterday, the British pound cooled its heels with pinball like trading between 1.94 and 1.9320. Finally, the volatility leader for the past few weak, USDJPY has only recently tested the boundaries of a 60-point range with a move through 117.60.
Usually, event and volatility traders are thankful when top shelf economic releases are scheduled to move the markets. However, when the docket gets a little crowded – as it was today – well planned trades can go up in smoke with conflicting readings or non-event prints. For the producer price index, perhaps the most highly anticipated number for the day, the latter was true. At first glimpse, the indicator seemed to be fuel for dollar bulls as headline inflation jumped 1.3 percent for the month of February while the core equivalent doubled expectations with a 0.4 percent increase. On closer inspection though, its possible affects on Fed policy or even a big pop in the downstream consumer index was more ambiguous. On the one hand, the 2.5 percent annual pace of price growth is still well below the rate seen in 2005 and the first half of 2006 that initially put the central bank on its habit of quarter-point rate hikes. Alternatively, the annual core report unexpectedly held its 1.8 percent gait. In terms of updated expectations for the CPI data tomorrow, the initial outlook for a slight pick up in the headline numbers seems to be well supported by today’s PPI and yesterday’s import price index.
When traders moved outside of the PPI’s orbit, the fundamental scene changed. A number of reports hit the wires with substantial surprises, though each seemed carefully placed to offset the other. From the positive ledger, strong jobless claims and TICS numbers marked the rally point for bulls. Though the monthly payrolls number is still some time off, the drop in initial filings for unemployment benefits to a five-week low 318,000 is promising nonetheless. More important for fundamentalists, the sharp drop in net capital inflows to the US in December to a near five-year proved a fluke when the January print hit ran across the ticker at $97.4 billion. Pulling the indicator into the fold, the improvement will allow optimists to better enjoy the initial shrinking of the physical deficit. Conversely, the TICS gauge itself my come under fire in future months as traders prepare for the effects of the March stock correction on total flows. Elsewhere, making for an even balance sheet, two factory surveys revived fears of a recession in the manufacturing sector. Market participants were surprised mid-day in New York when the Philly Fed dropped to 0.4 when economists had predicted a considerable climb to 4.0. Then again, the previously release Empire survey had already numbed the dollar to such a disappointment. The indicator posted its biggest month-over-month drop on record while marking a 21-month low in the process. Now the market will turn to a heavy mix of the consumer inflation, industrial production and University of Michigan sentiment reads to see whether the stars will align for solid trend.
Analysts are starting to believe the worst has already passed for the US stock market as benchmark indices work for steady gains. By 15:00 GMT, the S&P 500 was ahead of the rest with a 0.4 percent advance to 1,392.66. The NASDAQ Composite rose 0.27 percent to 2,378.19 and the Dow pulled 0.26 percent higher to 12,165.21. Perusing the list of top volume and price movers, many of the blue chips were on deck. Alcoa shares jumped 2.5 percent to $34.15 on the day after the smelter it jointly owned with the government of Ghana was closed indefinitely and prices for aluminum rose in response. In the near and dear world of electronic trading, the ICE caused ripples when it made an unsolicited bid to merge with CBOT Holdings. Shares of ICE dropped $4.84 or 3.7 percent to $127.09 while those of CBOT surged $21.48 for a 12.9 percent move to $187.57.
With many of the macro data canceling out on the session, treasuries were little changed by mid-day trade. The ten-year note was unchanged at 100-23 with a yield of 4.534 at 15:00 GMT. T-bonds edged 2/32nds higher to 100-28, though their yields were also unmoved at 4.695 by the same time.