US dollar pessimism heightened as fresh data hampered the growth outlook for the troubled economy. As market participants sold off risky assets, including forex carry trades, the Swiss franc and Japanese yen gained against the US dollar. Against the European counterparts, the greenback dropped versus the euro as ECB President Trichet’s commentary suggested little chance of a rate cut in the near-term, while the British Pound trailed behind. Conversely, the US dollar picked up against the New Zealand and the Canadian dollar, while the Australian dollar inched up to hold near the 0.9200 level.
The stock markets slid as the pessimistic data pressed on the growth outlook, with market sentiment turning sour as Oppenheimer & Co lowered their earnings forecast. Consequently, the DJIA shed 109.74 points to leave the index at 12,422.86 points, with Exxon and Chevron posting the biggest gains as oil prices climbed just shy of 106 a barrel. Among the broader indices, the S&P500 lost 11.86 points to leave the index at 1,341.13, with Alliance Data Systems topping the losers.
The rise in risk aversion pushed many investors into the safe haven of risk free bonds, and sent US Treasury prices higher. Consequently, the benchmark 10-Year yield dropped to 3.46 percent from 3.50, while the 2-Year yield fell to 1.63 percent from 1.77 percent.
Looking ahead, we expected increased volatility to take hold of the US dollar tomorrow as the GDP and Personal Consumption index will kick off the morning at 12:30 GMT. Fresh employment data due out for release at the same time and forecast a dollar sell-off as we anticipate a decline in the labor force.