The US dollar swayed back and forth throughout the day’s session amid a bare economic calendar for the past two days, and was able to fend off the Pound Sterling as the Bank of England Minutes spurred bets of another rate cut down the road, while the Yen lost ground as consumer spending continues to dwindle. The Euro took the biggest bite out of the US dollar as mounting speculation of more aggressive rate cuts by the Fed led the Euro to appreciate the most this month. The Canadian dollar was the only commodity currency to tread water against the US dollar as Consumer Prices and Wholesale sales fell more than expected, raising speculation that the Bank of Canada’s monetary policy will soon follow the Fed.
The NAHB Housing Market index showed minor improvements in home builder’s confidence as it inched up to 20 from 19, but remains around its historical low of 18 as it reflects the housing crisis still has yet to bottom. Many investors became weary of the current economic outlook for the US, and led commodity prices to surge as demands for inflation-hedged investments pick up. Gold prices rose the most in seven weeks as prices jumped $3.70 to hit $929.80 an ounce, while oil gained $3.99 to reach $99.49 a barrel as the Organization of Petroleum Exporting Countries stated that they are looking to cut production in the March 5th meeting.
Increased volatility hit the securities market today as an intraday reversal led to a third day of losses. The DJIA rose 150 points in the morning session, but reported a net loss of 10.99 points by the end of the session to leave the index at 12,337.22 points. Chevron and Exxon were the biggest winners of the big 30 as oil prices jumped today, while communication giants AT&T and Verizon topping the losers. The broader S&P500 also followed as it fell 1.21 points to 1,348.78, with Feddie Mac leading the losing board as it lost $5.95 a share, while Corporate Express NV topped the winner’s board as shares rose $2.79.
US Treasuries fell today as the securities market advanced during the morning session, amid downgrades of bond insurers by rating agency Moody's Investors Services. The downgrades by Moody’s may cause huge write downs for banks as their hedges lose value, and Moody officials advised banks to increase their reserves in order to cover the counterparty risk. As a result, the 10-Year yield surged to 3.90 percent, while the 2-Year yield jumped to 2.08 percent. For tomorrow, we await the Consumer Price index release as well as the Housing Starts and Building Permits figures.
