The commodity rally continued unabated in the NY session and this coupled with gains in stocks helped deal a major blow to the US dollar. Oil prices surpassed the $73/bbl mark as demand forecasts for 2009 were taken up a notch. Equities jumped on a positive US retail sales report which showed a 0.5% increase in May. The ''core'' number however (excludes gasoline, building materials and auto dealers) came in flat and suggests an overall weak report. The S&P extended higher nonetheless but failed to close above the critical 950 mark after testing well beyond it intraday. This could put some technical pressure on stocks as we head into the weekend. Insofar as risk is sold, the buck should be ''better bid''.
The Treasury auctioned $11 billion in 30-year bonds and the results suggest demand for US paper remains extremely robust -- especially from the overseas community -- and that talk of a US funding problem are overblown at this point. The bid/cover for the 30-year came in at 2.68 and well above the six-month average 2.29 while foreign demand was very strong with 49% of the offering taken by indirects, compared to a six-month average of 31%. Deficit worries remain however and the just released US Flow of Funds report for the first quarter suggests that while it is clear that the consumers and businesses continue to cut back, the Federal government's appetite for spending and borrowing remains voracious. Not exactly a USD positive story there.
The dollar weakness was pretty well across the board. EUR/USD popped a nice 115 pips towards 1.4100/10 as the close approached. The 200-hour SMA lurks at 1.4084 and below there could see things get a little ''dicey'' for the pair. Expect good resistance into 1.4200 as well. Cable ripped about 130 pips higher into the 1.6570/80 zone as well. Last week's highs by 1.6660/70 looks like the next crucial hurdle here while weakness should open up below 1.6500 as well. USD/JPY and EUR/JPY were choppy as per the price action in stocks. The former was sitting -60 pips lower by 97.60/70 while the latter rose 35 pips into the 137.70/80 area.
Upcoming Economic Data Releases (Asia Session) prior expected
- 6/11 22:45 GMT NZ Retail Sales (MoM) APR -0.40% 0.20%
- 6/11 22:45 GMT NZ Retail Sales Ex-Auto (MoM) APR 0.50% 0.40%
- 6/12 2:00 GMT CH Retail Sales (YoY) MAY 14.80% 15.00%
- 6/12 2:00 GMT CH Industrial Production (YoY) MAY 7.30% 7.70%
- 6/12 4:00 GMT US U.S. Treasury's Geithner at G-8 Meeting in Italy
- 6/12 4:30 GMT JN Industrial Production (MoM) APR F 5.20% - -
- 6/12 4:30 GMT JN Capacity Utilization (MoM) APR F 0.80% - -
- 6/12 5:00 GMT JN Consumer Confidence MAY 33.2 34
