The dollar pushed ahead Monday morning despite a number of scheduled and unplanned events since the weekend that has left the greenback in a fundamentally questionable position for the new week. Most prominent in the event schedule was the US current account deficit, which printed almost exactly in line with expectations.
Price action was dominated by the pound and Swiss franc pairs, both of which saw fresh highs for the dollar. From 1.9580 in the early European session, the GBPUSD tumbled over 140 points to match a low at 1.9435 marked on November 29th. The USDCHFs rally only tallied 85 points, but the 1.2270 session high was on level with spot action from November 23th. In comparison, the push against the euro was halted after a modest 65-point dip that held up Fridays session lows around 1.3050. Finally, the closely USDJPY held its own range as cross market news anchors action.
After the intense economic calendar last week, the few scheduled events for Monday morning slowly brought the remaining fundamental traders back to their screens. Before the open of US capital markets, the Commerce Department released the numbers for the third quarter current account balance. Few eyebrows were raised when the periods deficit swelled to a record that was guided by a burgeoning trade shortfall. In foresight that seemed almost prophetic, the gap measured $225.6 billion; almost exactly in line with the $225 billion expected. Trade in physical goods and services, which accounts for an estimated 90 percent of the entire account balance, grew from $191.3 billion to $200.3 billion. This was largely expected after the monthly records printed a record $68.5 billion deficit in August. The push from the remaining components in the report was modest. Unilateral transfers (pure outflows like governmental foreign aid and charity) eased slightly to a $21.5 billion deficit. Also noteworthy, but little influential on the overall account was the balance in income transfers. At a record $3.8 billion shortfall, foreigners are earning more on high yielding US debt and strong equity markets than Americans are pulling in on their foreign investments. When all was said and down though, the lack of any surprise with the quarterly number and recent improvements in monthly data for Octobers trade figures easily downgraded the days event risk and kept the dollar moving forward.
While the broad trade account was clearly in the dead center of traders crosshairs, there were a few other events scrolling across the ticker. The NAHB Housing Market Index tried to fill in a ceiling for the greenback when the gauges December read missed an expected improvement to step down to 32. A reading below 50 means respondents are pessimistic over the markets health. While this is still better than the 15-year low, 30 print from September, the print suggests a bottom is not yet in sight. Elsewhere, the weekend held a few interesting developments for the dollar. The Washington envoy to China, with Fed Governor Bernanke and Treasury Secretary in attendance, made little headway in cooling tensions between to the two economic powerhouses. China repeated its now ubiquitous promise to improve currency flexibility, but made few concessions for further opening up their markets or policing international copyright infringement. Equally disappointing, the central banks of Iran and the United Arab Emirates publicly weighed in on their efforts to diversify out of the US dollar. UAE officials said they were waiting for a clear trend before converting their reserves into euros or any other currency. Decidedly more frank, Iran said it would fully flush its system of dollars, which are estimated to be only 30 percent of their $45.5 billion reserves. Looking ahead to tomorrow, housing data and the lingering factory inflation data for November will up the ante for event trading.
Equities were cautiously floating higher though the slow deterioration in macro-economic data kept fresh record highs limited. The Dow was pacing the group with a 0.25 percent advance to 12,476.60 by 16:25 GMT. The NASDAQ Composite was bumped 0.15 percent higher to 2,461 while the S&P 500 edged 0.09 percent in the black to 1,428.40. On the relatively quiet session, blue chips were stealing the headlines. Conglomerate Time Warner Inc. saw its shares advance 0.5 percent to $21.76 as initial media reports revealed three top executives plan to quit as a product of the firms reorganization plans. In other news, Oracle shares were run up 2.4 percent to $18.11 following as investors positioned themselves ahead of the firms earnings report due after the close of trade today.
Treasury instruments were little moved through Mondays morning session. Ten-year notes edged 2/32nds higher to 100-10 with yields a basis point lower at 4.585 by 16:24 GMT. T-bonds were also up 2/32nds to 96-22 while its own yield slipped a basis point to 4.709.
