For the first time in the past few active sessions, a dollar bounce came on the behest of US data. The market was fully prepped for a modest change in the ISM manufacturing survey and a dated pending home sales report - calm conditions that opened the door for surprises on the calendar and in price action.
For the majors, though the dollar put in sharp moves across the board, major technical levels were still in place to keep the greenback under pressure for NFPs Friday. By mid-day in the New York session, EURUSD was firming up on range support around 1.3590 after falling 90 points from a morning high that looked to test the record high. The brief GBPUSD rebound seems to have put in a last gasp move to 2.0075 that was quickly followed by a 95-point plunge to a floor put in overnight around 1.9980. No where was the pressure as intense as in USDJPY which swung lower to 119.05 before quickly charging to 119.85 to noticeably push resistance that was eyed 10 points lower. Finally, the top mover from the majors was USDCHF which cleared the 1.21, topside hurdle in a massive 115-point rally.
Fundamental traders took a hard turn from inflation and consumer spending to housing and manufacturing activity - a symbolic shift from the main dollar drivers to the chief detractors. However, the status quo may be in flux considering the past few sessions numbers. Yesterday, consumer spending adjusted for inflation in March cooled the most in a year-and-a-half. And, today, the Institute for Supply Managers survey on factory conditions actually hit its highest level in a year. The headline manufacturing report rose from a 50.9 print to 54.7 in April on the back of improvements in production, orders and employment. In this data there seems to be clear evidence that inventories have been worked down to tolerable levels and production will contribute to growth in the second quarter. Isolating the data, production rose to its highest level in 11 months while new orders hit a 13-month peak. Naturally, the pickup in production generated the need for more hires, which helped push the employment gauge back above to pivotal 50-level. Though the markets short attention span was stuck on the headline manufacturing number, future price action will be colored by the employment component as dollar traders work in on their payroll outlooks.
Fighting for the markets attention, the National Association of Realtors pending home sales report printed a surprising number of its own. Essentially a gauge of signed purchase agreements on existing homes, the indicator reported its biggest drop in more than four years. This considerable drop was largely a response to flooded inventory and an increase in lending standards following the jump in sub-prime loan defaults through the end of February/beginning of March. While the change is a volatile, the overall level is certainly more stable and therefore harder to write off. The level of the housing report also hit a four-year low, suggesting bigger factors are at play. Namely, potential buyers are deferring their plans to purchase a new or used home until prices follow the lead of sales numbers. Despite the dour read on the housing sector this report offers, this indicators impact on the currency market is somewhat limited. Put into a hierarchy, the pending home sales report lags the existing number chronologically and the new purchases figure structurally.
Equities traders were not as happy with todays fundamentals as those in the currency market. The rebound in manufacturing offered little consolation to the steady slide in housing activity, and even roused inflation fears with its prices paid component. By 15:25 GMT, the Dow Jones Industrial Average was the only index in positive territory with its 0.24 percent rise to 13,094.61. The S&P 500 was moderately off the open at 1,481.82 while the NASDAQ Composite fell 0.15 percent to 2,521.24. From the mixed markets, a few notable M&A deals stood out. A story ran by the New York Post that said Microsoft would buy 24/7 Real Media for something around $1 billion sent both firms higher. Microsoft shares rose 0.9 percent to $30.20 while those for 24/7 surged 20.5 percent to $11.99. Perhaps a more surprising bid was News Corp.s offer for Dow Jones. Investors depressed News shares 2.1 percent to $23.50 on the report, while Dow Jones saw its value jump 55.2 percent or $20.07 to $56.46.
A lagging housing report didnt seem as important as a rebound in factory activity for Fed outlooks. The T-note was up 9/32nds to 99-23 by 15:25 as its yield grew 4 basis points to 4.660. At the same time, the thirty-year bond slipped 12/32nds to 98-19 as its own yield rose 3 basis points to 4.838.