US Dollar Weaker On Soft Retail Sales Report, Consumer Survey Leaves Some Optimism

Bearish undertones continued to plague the US dollar during the New York session following rather lackluster US economic reports. Continuing on yesterday?s momentum, the Euro remained higher against the greenback and traded at an all time high of $1.3810 in the morning, while declining against the British pound to the tune of $2.0365. Subsequently falling against the Japanese yen to below the 122.01 mark, the greenback was able to regain some support against the Canadian dollar after testing C$1.0450, the fourth gain in five sessions.

Dour news early in the New York morning helped to suppress dollar strength in the week?s closing session as both US advance retail sales and consumer confidence numbers were slated for Friday. Worse than expected, US retail sales figures actually dipped on the month, far worse than expected by consensus estimates of a 0.1 percent drop. In June, retail sales dipped 0.9 percent in the annualized comparison, much lower than expected as consumers felt the pain of higher energy costs and worried about housing sector woes. Acting as a blanket tax, the cost of a gallon of gasoline was above $3.00 on average for the month curbing spending habits. Subsequently, the core figure, which excludes the auto component, slipped by 0.4 percent, the most since September. Although painting a far worse picture of the US economy, retail results for the month were somewhat countered by consumer sentiment that increased to the highest level since January. Released at a 92.4 reading, the University of Michigan?s consumer sentiment preliminary gauge for July was far higher than the 86 expected by the consensus. Attributed to the supportive reading was a brighter employment picture as labor market tightening seems to be keeping individuals hopeful of things to come.

The equities torch continued to shine as momentum from yesterday?s rally continued to buoy stocks into midday trading. Rising by 290 points yesterday, the benchmark Dow Jones Industrial Average continued higher and advanced by 24.39 points to trade at 13,886.12. Meanwhile the broader S&P 500 climbed to 1,548.90, up 1.2 percent for the session as the Nasdaq slipped slightly to 2,695.77. Further speculation regarding the Alcan deal helped to support stocks for the session as General Electric Co. announced a proposed share buyback plan worth $14 billion. Separately, rumors contributed heavily to the overall sentiment as speculation heightened over a possible investment stake in Hovnanian Inc. by Warren Buffett. As a result, shares in the US homebuilder spiked 8.4 percent higher at $17.94 a share.

Fixed income markets were supported by bearish figures in the morning, helping the benchmark ten year note to rise during the session. The buying momentum helped to bring yields lower, dropping from 5.13 percent late Thursday in New York to trade 3 basis points down at 5.10 percent.