The USD fell to new lows for the year against most other currencies as the recent trend toward USD weakness accelerated.  The immediate catalyst appeared to be concerns over the ability of the US to fund its massive borrowing needs, as USD selling intensified after the Treasury announced larger than expected debt issuance next week.  That announcement came following a disappointing round of the Fed's asset purchase plan (aka quantitative easing), which accepted only about 16% of the amount on offer, leaving many in a rush to exit long positions, and the news of larger supply next week added to the crush of sellers.  US Treasuries plunged more than a point and yields ran up to new highs for the year at 3.37% in the 10-year note.  Concerns over the US AAA rating were also voiced, coming on the heels of S&P warning on the potential for a downgrade to the UK's credit rating.  Interestingly enough, traders shrugged off S&P's concern about the UK and GBP finished out on new highs against the USD.  Stocks were sold throughout the day, but even nearly 2% declines could not lend the USD support, as the safe have appeal seems to have vanished.

EUR/USD held on after an early test of the break level at 1.3720/40 area, and eventually broke above recent highs at 1.3830/60, drawing in fresh buying and sending the pair to a high around 1.3925.  USD/JPY briefly tested above 95.00 on rumors that the BOJ was checking rates, a prelude to possible market intervention, but later succumbed to broad based USD selling, falling to a low around 94.00 before  recovering slightly to close near 94.30.  GBP/USD clawed its way back after the surprise S&P comments sent the pair from around 1.5800 to a low above 1.5500, gaining from 1.5650 NY opening levels and making new highs on the day just below 1.5900.  JPY-crosses continued to move sideways as the action was primarily focused on the USD.  Gold pushed higher on the back of USD weakness to finish up nearly $16 around $955.50/oz.

Data in NY showed a further slide in US labor markets as continuing claims reached a new all-time high at 6.662 mio vs. the prior week's 6.587 mio, while initial jobless claims remained elevated at 631K vs. the prior week's 637K.  The Philadelphia Fed's index of manufacturing sentiment improved less than expected, from -24.4 to -22.6, renewing concerns that evidence of economic stabilization may not persist.  Ahead in Asia, the BOJ is likely to hold rates steady at 0.10% after the conclusion of their regular policy meeting.  Also, Phila. Fed Pres. Plosser will speak on the US economic outlook in an evening speech in NY.

Upcoming Economic Data Releases (Asia Session) prior expected

  • 5/21/2009  20:55  UK  Bank of England's Bean to Make Speech  21-May  
  • 5/21/2009  23:00  US  Fed's Plosser Speaks on Economic Outlook in New York  21-May  
  • 5/22/2009   JN  BOJ Target Rate  22-May  0.10%  0.10%
  • 5/22/2009  5:00  JN  Supermarket Sales (YoY)  APR  -4.00%  - -
  • 5/22/2009  5:00  JN  Leading Index CI  MAR F  76.6  - -
  • 5/22/2009  5:00  JN  Coincident Index CI  MAR F  84.9  - -