A dollar advance was spanning the global FX sessions Thursday as the recent spat of strong indicators draws bulls out of the wood works going into Fridays wall of releases. While carried-through sentiment and speculation of releases ahead were firmly supporting the greenback, the New York session was not without data.
An improvement in the weekly jobless claims report and rebound in import inflation helped keep the currency on track. Only a few hours into the New York session, the EURUSD pair was trading as low as 1.3145, nearly 100 points from the intra-day high set in only hours before. The same pattern was realized against the pound, which gave up 115 points after making a short-lived run up to 19715. Long entrenched its dollar advance, USDJPY pushed only 65 points higher. Finally, the Swiss couldnt rally support on the recent rate hike, leaving dollar bulls to over take 1.2085 in a 125-point rally.
The event risk inherent in todays scheduled releases was already well below that expected for Fridays number of indicators, but the data played its part in flushing out speculation for later releases. Headlining the session, the Import Price Index for the month of November is the first of the governments three inflation reports. In its previous two releases, the import price gauge was making headlines of its own as the monthly measurement reported back-to-back declines of 2.0-plus percent. As was expected, the stabilization in energy prices helped put the overall indicator back on a positive track. After a sizable 10.1 percent drop in October and 10.9 percent contraction in prices in September, the petroleum complex shed a relatively meager 1.6 percent last month. A key component in this normalization was natural gas shipments whose value shot 30.3 percent higher, the biggest increase in two years. Aside from the petroleum groups improvement, inflation in industrial supplies had also made a sudden change from month to month. Slipping 6.6 percent in October, the broad gauge reported average prices actually grew 0.6 percent in the following month.
One key statistic in this report, which will undoubtedly play a role in last minute revisions in speculation over tomorrows CPI release, is the headline number excluding petroleum price changes. The equivalent of core CPI, the more stable measurement actually jumped 0.7 percent on the month, the biggest increase in over a year. This could foreshadow a stable core report in the consumer index, which backed off of its decade high 2.9 percent in last months read. A stable rate tomorrow would vindicate the Feds decision to leave its inflation warnings in place in its post-rate decision statement. Looking ahead, core inflation may not be the only worry for policy makers. OPEC leaders decided in its meeting in Abuja, Nigeria today to cut an additional 500,000 barrels a day in output beginning February 1st. This adds pressure to the promised 1.2 million barrel cut decided in October, which has yet to fully take affect. In the morning hours of trade, WTI crude prices rallied 1.4 percent on the news to $62.25 per barrel.
Though other US capital markets were moving through the day with modest volatility, a run in earnings announcements sent equities indices higher. By 15:40 GMT, the NASDAQ Composite pulled away from the major indices in a 1.2 percent rally to 2,461.27. Not too shabby itself, the S&P was 0.73 percent higher at 1,423.46 while the Dow rose 0.6 percent to 12,391.69. The financial sector was accounting for a lot of the earnings activity. Shares of Bear Stearns grew 1.2 percent on a $1.82 advance to $157.71 after reporting fourth quarter income that was up 38 percent. Lehman Brothers had also printed better than expected earnings numbers, though its share value fluctuated between red and black. Shares of Lehman were off $0.37 or 0.5 percent at $76.00. Elsewhere, wholesalers Costco reported first quarter profits of $236.9 million to best expectations. Shares of Costco were up $1.85 or 3.5 percent at $54.99.
Treasuries were in the same boat as currencies, as the import price index this morning offered little guidance on policy shifts on inflation fears at the Fed. T-notes were off 3/32nds at 100-08 with yields a basis point higher at 4.591 by 15:40 GMT. Thirty-year bonds were quoted 6/32nds lower at 96-22 while its own yield was also up a basis point at 4.709.
