The US dollar lost ground against most of the major currencies due to surging oil prices, and led the low yielding Swiss franc and Yen to take the biggest bite out of the greenback as investors curbed their risk appetite. As a result, the New Zealand and the Canadian dollar were the only currencies to trail against the greenback, while the Australian dollar picked up a modest gain as better than expected employment data heightened the appeal of the Aussie. Against the major European currencies, the US dollar slide against both currencies as the European Central Bank and the Bank of England opted to hold the benchmark interest rate at 4.00 and 5.00 percent, respectively. As a result, the euro picked up to trade just above 1.54, while the British Pound held up to trade at 1.95.
Increase volatility shook the stock markets as oil futures spiked above $124 a barrel, but ended the session in positive territory as Wal-Mart and News Corp. posted better than expected profits. As a result, the DJIA rose 52.43 points to 12,866.78 points, with Alcoa and Chevron leading the advancers. Among the broader indices, the S&P500 picked up 5.11 points to hold off at 1,397.68 points amid 207 stocks falling to a new 52 week low.
Instability in the stock markets pushed risk adverse investors into the safe haven of risk free bonds, and sparked increased demands for US Treasuries. As a result, the benchmark 10-Year yield fell to 3.782 percent from 3.850, while the 2-Year yield plunged to 2.227 percent from 2.316 percent.
Looking ahead, we expect increase volatility in the Canadian dollar as fresh employment data is scheduled for release at 11:00 GMT, with the International Merchandise Trade index adding to the mix as we forecast the trade surplus to narrow to C$4.5B from C$4.9B. The Trade Balance report for the US will be the last bit of economic data for the week, and is due out for release at 12:30GMT.