Dollar's decline as WSJ article sparks debate of perhaps a less−dovish Fed
International trading
MAJOR HEADLINES – PREVIOUS SESSION
THEMES TO WATCH – UPCOMING SESSION
THE TECHNIQUE OF GIVING A GOOD MASSAGE
14 years ago
Tuesday, September 28, 2010
, Posted by Usman Ali Minhas at 12:36 AM
But Asia keeps currencies within established ranges
US Aug. Chicago Fed Activity Index out at -0.53 vs. -0.50 expected and revised -0.11 prior
US Sep. Dallas Fed Manufacturing Activity out at -17.7 vs. -6.0 expected and -13.5 prior
JP Sep. Small Business Confidence out at 47.3 vs. 48.4 prior
(All Times GMT)
GE CPI data (n/a)
GE GfK Consumer Confidence Survey (0600)
Swiss UBS Consumption Indicator (0600)
EU ECB’s Tumpel-Gugurell to speak (0645)
UK Final Q2 GDP (0830)
UK CBI Reported Sales (1000)
UK BOE’s Posen to speak (1300)
US S&P/CaseShiller House Prices (1300)
US Consumer Confidence (1400)
US Richmond Fed Manufacturing Index (1400)
Market Comments:
Another bout of dollar weakness was seen overnight as the rush to position for further Fed QE continues. The US saw record demand at its auction of $36 bln worth of 2-year notes which in turn kept yields at record lows (final yield 0.44% and a bid/cover ratio of 3.78, a three year high). The EUR took a peep above 1.35 temporarily on the back of the dollar’s weakness having recovered from an early sell-off as Moody’s downgraded Anglo Irish Bank debt a few notches and Irish/German yield spreads widened. USDJPY was tight-ranged above 84.0 again with BOJ fears keeping activity muted.
US data releases were predominantly second-tier with the Chicago Fed activity index a tad worse than expected (-0.53 versus -0.50 and a downwardly-revised -0.11 last time) while the Dallas Fed index was a more despondent -17.7 versus -6.0 expected and -13.5 last). Equity markets retreated from last Friday’s strong close with the DJIA giving back 0.44%, S&P -0.57% and the Nasdaq -0.48%.
We saw a mild rebound in the US dollar late in the New York session as a WSJ article attracted the market’s attention. The piece suggested that the Fed officials may be considering a slightly different approach to any extension of is treasury securities buying programme. Rather than announcing massive bond purchases with a finite end, the author moots whether a more open-ended, smaller scale programme may be in the offing, offering the Fed a touch more flexibility if the recovery unfolds. Seen as a less-dovish approach than the market had been considering, the Asian session started with a slight risk-off feel to it with a bounce for the dollar but risk soon recovered with currencies back to New York closing levels.
Data releases were again thin on the ground in Asia so most currencies kept to established ranges and we have yet to see any impact from the month-end effect. It is slightly busier in Europe on the data front with German GfK consumer confidence and CPI data from the various states, Swiss consumption, Sweden’s retail sales and final Q2 GDP from the UK to excite. The US session features S&P/CaseShiller house prices along with US consumer confidence readings (both monthly and weekly) and Richmond Fed manufacturing index while the US Treasury auctions another $35 bln of 5-year notes.
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