The USD recovered from the overnight rout as risk appetite plunged in the NY session. US equities sank more than -1% with the Dow Jones Industrials making a fresh low close at 7465, since the 2007 peak above 14000. Bonds were also sold, however, as producer prices rose a higher than expected +0.8% in January after slipping a sharp -1.9% the prior month. With deflation risks clearly on the backburner, US 10-year yields shot up 10bps to 2.85%.
Other US economic data continued to disappoint as well. Initial jobless claims jumped 627K in the latest week and this matches last week's increase and is a fresh cycle high, to boot. The result puts the prospect of a -700K nonfarm payroll decline within striking distance. The other notable piece of data was the Philly Fed manufacturing index for February and it got absolutely decimated to -41.3 from -24.3 and this coupled with the poor NY Empire results suggests a bleak ISM print is in the cards.
EUR/USD slipped about -50 pips in the session and was sitting just above the next critical support level which lurks by the 1.2640 level. USD/JPY shot about 60 pips higher despite the decline in equities, in an indication that the USD safe haven bid remains intact. Cable was punished more than -120 pips as a try for 1.4450 failed miserably. And just in case anyone was wondering, BOE member Gieve came out with comments that the risk of a UK depression is not trivial. Dollar strength was also prevalent in USD/CAD which rallied more than 100 points to 1.2570/80 despite the +12% surge in oil towards the $39/bbl level.
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- 2/19 23:50 GMT JN All Industry Activity Index (MoM) DEC -2.30% -2.70%
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