The US dollar’s European session rally was capped by a drop in US durable goods orders and as oil prices climbed back above $130/bbl. As a result, the high yielding Australian and Canadian dollars gained the most against the greenback, followed by the British pound, which traded near 1.9800. The low yielding Swiss franc and Japanese yen strengthened slightly during the US trading session, consolidating early morning losses, as the pairs traded near 1.0375 and 104.70, respectively. The New Zealand dollar however, remained weak against the greenback as ANZ National Bank highlighted recessionary risks for the New Zealand economy.
Fresh economic data added to recessionary fears as the Commerce Department reported that US durable goods fell less than expected by 0.5 percent. On the other hand, durable goods excluding transportation rose 2.5 percent, aided by improvements in business investment and defense spending. Meanwhile, the US housing recession continues to add downside growth risks for the economy as the Mortgage Bankers Association announced a 4.6 percent decrease in Mortgage Applications amid a 1 percent rise in the four week average.
Bearish sentiment shook the stock markets as KeyCorp expected to post additional losses in 2008, but rose back into positive territory late in the session. As a result, the DJIA rose 45.68 points to 12,594.03 points, with IBM and Caterpillar leading the winnings board. The broader S&P 500 picked up 5.49 points to hold at
Demands for US Treasuries wavered as recessionary fears subsided, and led investors to leave the safe haven of risk free bonds in search of higher returns. As a result, the benchmark 10-Year yield rose to 4.021 percent from 3.915 percent, while the 2-Year yield surged to 2.632 percent from 2.505 percent.
Looking ahead, the first quarter GDP release at 12:30 GMT will be the major event risk for tomorrow as the figure is expected to be revised up to 0.9 percent from 0.6 percent, while the personal consumption reading is anticipated to hold at 1.0 percent. Initial jobless and continuing claims will follow the growth report, which is forecasted to show gains to 370K and 3080K, respectively.