Following up on yesterdays disappointing data, Tuesdays economic calendar delivered another wave of bearish numbers for the dollar. Offering a relatively market-moving mix, indicators of consumer confidence, manufacturing activity in the Richmond area and housing prices all hit the wires below their official consensuses.
Despite the fundamental implications of todays economic data though, there price action against the dollar was constrained for much of the morning. Reserving its choppy behavior, EURUSD rose off of its range low at 1.3320 only to find resistance later around 1.3365. At the same time, USDCHF carved resistance out around below 1.2170 before hitting an intraday double touch low around 1.2120. Still drifting after last weeks run, GBPUSD accelerated declines from the Asian session to a 1.9620 low before gradually, rising 60 points through the morning hours in New York. Finally, USDJPY was testing the boundaries of its well formed wedge formation. After topping out above 118.40, the pair made a quick swing down to 117.70.
Though there were more indicators scheduled for release on todays docket, their combined market-moving capacity proved more reserved than Mondays new home sales report. Preparing for the session, the Conference Boards consumer confidence survey was the most highly anticipated release for the session. As expected, optimism slipped from its five-year, February high. Printing at 107.2, the monthly read came in slightly below the markets official 108.5 prediction. While this was a modest disappointment, the market was rather welcoming of the number as many traders expected much worse. Through March, rising energy prices, a sharp drop in equities and growing concern in the sub-prime lending market levied a hefty burden on consumers shoulders. Often the guide dog for this survey, the price per gallon of regular gasoline averaged $2.58 per gallon on March 25th according to Bloomberg, the most expensive the nation has seen since September. The more unique weight on optimism was the anxiety in the sub-prime mortgage sector. Over the past few years, lenders have loosened their application requirements and allowed those with poor credit histories to take on loans with little-to-no documentation and an obvious lack of income. Now, as many of the adjustable rate mortgages adjust to current interest rates, default rates from the group have hit four-year highs.
However, any consultation found in the drop being modest is flimsy at best. Many economists argue that the Conference Boards numbers are heavily influenced by the condition of the labor market. Interestingly enough, the percentage of respondents reporting jobs as plentiful rose to the highest level in five years. In comparison, the University of Michigans sentiment report for March dropped to a six-month low while a survey from ABC News and the Washington Post reported its biggest contraction since February of 2004.
In other news, the Richmond Feds manufacturing index for March fell in line with the Philly and Empire reports released before it. Expected to improve slightly in its net-negative reading, the indicator instead matched the previous -10 reading. Now those speculating on next weeks ISM manufacturing report will turn to Fridays Chicagos purchasing managers index for last minute confirmation. Also, the S&P/CS Composite 20 added its two cents to the nations housing woes. The lagging January reading reported its first year over year contraction in six years with a 0.2 percent drop.
Equities markets did not take the drop in consumer confidence so amicably. By 11:55 GMT, the S&P 500 led a tight pack of declines with a 0.48 percent fall to 1,430.53. The tech-heavy NASDAQ Composite produced its own 0.46 percent dip to 2,444.33 while the Dow fell 0.44 percent to 12,414.76. In the market moving list, home builder Lennar offered earnings numbers to go along with the disappointing sales numbers reported yesterday. Shares dropped 2.8 percent to $43.30 after the firm reported a massive 73 percent drop in first quarter earnings from a year ago. Elsewhere, auto manufacturer Daimler Chryslers shares benefited from a delay in releasing its earnings to switch its accounting from the US standard GAAP to IFRS. Its stock price rose $1.40 or 1.7 percent to 82.60.
Traders in the treasury market decided that todays macro-data would not sway the Fed its rate outlook. Ten-year notes were unchanged at 100-05 by 14:55 GMT with a yield of 4.603. The thirty-year bond slipped 4/32nds to 99-02 as its yield added a basis point to 4.808.