The US dollar fell across the board during a choppy trading session, with the New Zealand dollar gaining the most, as the currency hit a high of 0.7596, followed by the Australian dollar, which rose to 0.9471. Meanwhile, the Canadian dollar rise towards the end of the trading session as investors await inflation data due to be released tomorrow. The euro and British pound rose against the greenback as well, as the former tested resistance at 1.5535 and the latter rallied toward 1.9600. The Japanese yen continued on its bullish run, as the USD/JPY pair fell below the 108 mark.
Economic data confirmed a continuing slump in the US housing market, as MBA mortgage applications fell 8.8%. High borrowing costs discouraged potential and existing homeowners from attaining mortgages, as foreclosure levels continue to rise. ABC Consumer Confidence figures showed signs of improvement however it still stayed near low, as consumers remain worried about high gas prices, and a general increase in overall price level.
The stock market was plagued with bad news, as the Dow Jones Average hit a three month low of 12029.06, dipping 131 points and the broader S&P 500 index dropped 13.12 points to 1337.81. Market participants digested disappointing earnings reports, as FedEx Corps reports losses, due to rising transportation costs, and Morgan Stanley reported a 60% decline in their 2nd quarter earnings. Financials took a beating, as Fifth Third Bancorp planned to raise $1 billion in additional equity. Rising oil prices took a toll on market sentiment, as oil futures rose to $ 136/bbl. S&P 500 dropped 13.12 points to 1337.81.
Demand for Treasury bonds rose on the weak US housing data, as the news helped cool speculation that the Federal Reserve will raise rates next week. As a result, the yield on the benchmark 10-year and 2-year notes fell to the lowest level in four days, to 4.14% and 2.85% respectively.
Looking ahead, tomorrow’s US unemployment figures should set the tone for the trading session, as any unexpected deviations could have severe impact on markets. Also, the Philadelphia Fed and Leading Indicators figures should help indentify if the economy is experiencing a further deterioration.