Increased volatility took hold of the US dollar as lackluster data cut short the US dollar recovery, and swayed the weakened dollar ahead of the Non-Farm Payroll release.
As a result, the US dollar dipped the most against the Canadian dollar as gold futures surged above $907, with the Australian dollar following as the AiG Performance of Services Index increased to 53.8 from 53.2. Against the European currencies, the US dollar fell against the British Pound as the pair traded in the 1.996 range, while it advanced against the euro as Eurozone Retail Sales plunged more than expected to minus 0.5 percent. The US dollar picked up the biggest gains against the New Zealand dollar as the ANZ Commodity Price index peaked to a record high, and was followed by the Swiss Franc as the pair traded in the 1.01 range.
Fading service sector activity paired with accelerating downward pressures in the labor market held down the US dollar, and lowered the growth prospects for the troublesome economy. The ISM Non-Manufacturing index inched higher to 49.6 from 49.3, but had limited market moving effects as the services sector remains in a state of contraction. Fresh unemployment data also curbed bullish sentiment as Initial Jobless Claims unexpectedly rose to 407K from 369K, with Continuing Claims rising to 2937K from 2840K –hitting record highs that were reached during Hurricane Katrina. Home prices continued to tumble, but at a slower pace as the RPX Composite fell to minus 9.18 from minus 7.24.
Securities continued to pick up after yesterday’s correction, with technology giant Research In Motion attracting investors as fourth quarter profits more than doubled. As a result, the DJIA picked up 20.20 points to leave the index at 12,626.03 points, with Alcoa and IBM posting the biggest gains out of the big 30. Among the broader indices, the S&P500 edged up 1.78 points to bring the index to 1,369.31 points, with MF Global and USEC topping the advancers.
As growth concerns persist for the US, demands for risk free bonds accelerated and pushed Treasury prices higher. As a result, the benchmark 10-Year yield dropped to 3.581 percent from 3.596 percent, while the 2-Year yield fell to 1.887 percent from 1.891 percent.
Looking ahead, we expected US dollar volatility to persist as many market moving indicators will kick off the morning at 12:30 GMT. The Non Farm Payroll release will be the main focus for tomorrow as we forecast the index to rise to minus 50K from minus 63K. The Unemployment Rate and the Non Manufacturing Payroll release will follow immediately, with the week coming to a close after the Average Hourly Earnings release.