The dollar was mixed against the majors, as the early part of the trading session was preoccupied with economic data. The EurUsd fell 80pips to trading through 1.27, while the UsdJpy gained 90pips to the low 93 price area. The GbpUsd rose a little over 30pips to the low 1.47 level, after a volatile start being down as much as 100pips in intraday trading. Equities finished strong in the US with the Dow up 259pts on the Dow, while European stock indexes closed lower with the CAC down over 5% or 173pts. Bonds sold off late pushing yields as much 15bps higher on the 10yr treasury. Commodities extended losses as oil fell 5% to $41bbl, and gold down 1.25% to $757oz.

German factory orders came in drastically lower than expected at 6.1% vs. 0.5%, further cementing the weak economic environment in the Eurozone. This data follows the ECB’s rate cut of 75bps, bringing the benchmark rate to 2.5%. Investors will be watching GDP forecast closely to gauge the degree of further downside. ECB President Trichet noted that he is conscious of the danger of running out of policy tools, and purchasing assets directly from investors to boost the economy is becoming a greater possibility. There was limited news out of the UK, with the exception of a report by large bank stating the sterling may have hit a bottom, expecting the currency to recover in 2009.

In the US, the unemployment rate increased to 6.7% vs. 6.8% exp. Even though the reading was better than expected it still serves as further evidence of an economic recession. Non-farm payrolls fell substantially lower to 533k vs. 335k, creating a level of support for the Senate committee to reconsider bailing out the auto industry. The unemployment numbers clearly would have been even worse, if the auto makers were allowed to fail. The dollar surged in following the economic news, but lost ground when equities rallied.

ACM Forex
Advanced Currency Markets