After the heavy data flow yesterday, dollar traders used the morning hours of Wednesdays session to find their bearings. However, despite the majors range dependency, a strong manufacturing report in the early New York hours and a highly anticipated Fed minutes release were keeping the fundamentally inclined in the markets.
Measuring the influence of todays indicators, the EURUSD produced a noteworthy 25-point drop to 1.2775 support. This quick move was minor compared to the 60 point swing lower in the hours preceding the report. In the USDJPY, the early morning greenback move culminated around 118.20, making a third lower high in the higher time frames. Though the European session, the British pound slipped another 130 points against the dollar before the 50-day SMA stepped in around 1.8835. Finally, USDCHFs rebound measured 90 points until 1.2525 resistance humbled bulls.
Though an otherwise quiet day, the data coming off of the economic calendar was keeping the fundamental push-and-pull alive. The earliest release for greenback traders to interpret this morning was MBAs mortgage applications tally for the week through November 10th. Coming ahead of bigger housing reports due later this week, filings for new and refinanced mortgages grew 4.3 percent. Combined with the opening weeks 8.8 percent rise, the collective activity so far for the month was the best in months. Looking ahead, this will bode well for the NAHB activity index for the same month, but the housing starts number for October will play off of the weak fillings through its respective month.
A little later in the morning, the Empire survey roused the real data reactions. The first regional factory report for the month, the New York Feds index grew to a five-month high 26.7, throwing off expectations of a slight easing from Octobers read. From the breakdown of the survey, there were obvious improvements in demand and employment. The new orders component grew 10.6 points to a five-month high, while the recent sales-related shipment gauge marked a similar high on a 4.1-point pickup. Elsewhere, the employment sub-gauge acted to back up recent consumer confidence by making its own record high. However, the optimism surrounding this manufacturing gauge was tempered by the market. The trepidation undercutting this indicator was in response to the nature of the previous months factory numbers. While the New York-regional report made an advance in October as well, the other major Federal districts and nationwide ISM indicators did not share in the advance. This may suggest that when the auto sector is excluded, manufacturing activity is healthy. Nevertheless traders will pay greater heed to tomorrows Philly report to form a more reliable opinion.
Everything considered, the market overlooked most of the scheduled and unscheduled reports though in favor of processing the Fed minutes from the October 24th-25th policy meeting. Wadding through the report, there were a few growth highlights for traders to attach themselves to. Addressing the housing market, the policy group said they expected further adjustment, but the decline would be more orderly than some have feared. Other positive connections for the Fed were reports of strong investment spending and a tight labor market. When all was said and down though, inflation was the topic de jour. Discussing price pressures nearly three weeks ago, policy makers were unanimous in their concern over a rebound in inflation. On the other hand, the group was tuned into the possibility that the aggressive pace of inflation could abate by saying they expect the core gauge to ease in the future. All of these comments were discounted however as traders recognized these opinions were formed before yesterdays weak PPI numbers permeated the markets consciousness. With two very soft inflation reports under its belt and the Feds concerns always in mind, the event risk behind tomorrows consumer price index has grown. Should the core measurement back off, the dollar bears could come in droves.
Stronger-than-expected data was adding fuel to stocks move higher Wednesday. By 17:45 GMT, the Nasdaq Composite index was leading the major groupings with a 0.55 percent run to 2,444.00. Some ways behind, the S&P 500 was pushing to new highs with a 0.29 percent advance to 1,397.27 and the Dow was up 0.24 percent to 12,247.06. From the market movers list, merger announcements were touching off big moves. US Airways shares surged 14.1 percent on a $7.17 climb to $58.10 after announcing it tendered a bid for Delta for $8 billion in cash and stock. Another big deal was Pfizers $155 million offer for agricultural biotech firm Embrex. Shares of the pharmaceutical giant rose $0.36 or 1.4 percent by afternoon trade.
Government treasury paper was working its way lower by mid-day as the strong manufacturing report offset some of the strength following yesterdays price index. Ten-year notes were 10/32nds lower at 100-06 with yields up 4 basis points at 4.601 by 17:45 GMT. Bonds made a 14/32nds move lower to 97-02 while its own yield grew 3 basis points to 4.685.
