US Dollar Falls Yet Again, Gaining Treasury Yields to Force Retrace?

The US dollar once again set significant lows against major trading counterparts, with the morning?s Trade Balance data doing little to stem bearish momentum. The Euro reached fresh all-time highs at $1.3797, but enthusiastic options defense prevented extension above the psychologically significant $1.3800. The British Pound likewise set multi-decade peaks of $2.0364, but disappointing economic data left Cable down for the first day in five. Elsewhere, inaction from the Bank of Japan allowed the downtrodden US dollar to add 0.28 points to ¥122.58 through later New York price action.

Fresh fundamental news included the morning?s Trade Balance and Initial Jobless Claims releases. The US Census Bureau reported that the domestic trade deficit widened through the month of May, as steadily rising energy prices completely offset a gain in exports. The gap of $60.0 billion was exactly in line with forecasts, however, and the data failed to cause any sudden moves in the domestic currency. A simultaneous Jobless Claims release showed that the number of people claiming unemployment benefits dropped in the week ending July 7th. The continuing number inched lower to 2.554 million, while Initial Jobless Claims hit their lowest since May at 308k. These results may prove marginally bullish for the outlook on economic growth, but it remains to be seen if such news may force a dollar retrace.
Domestic equity markets proved much more fortunate than the downtrodden greenback, as news of fresh mergers and acquisitions sent the Dow to fresh record highs. The 30-company index was up an impressive 230 points to 13,808, while the broader S&P 500 added 22 points to 1,541. Tech stocks likewise saw a sizeable advance, with the NASDAQ Composite 40 points improved to 2,692.
The return to risk appetite saw Fixed Income markets shed a good portion of very recent advances, with the 10-Year Treasury Note losing 5/16 points to 95 and 3/16. Yields added 4 basis points to 5.13 percent. All other things remaining equal, such a bounce in rates of return should provide a boost to the greenback. Of course, similar gains across European yields completely offset potential US dollar bullishness.