Dollar Mixed After a Flurry of Data

The U.S. dollar was mixed as was economic data and equity markets climbed higher. The buck was strongest against the NOK, softer against the commodity currencies and relatively flat against the EUR and GBP. Discussions in Washington continued surround the extension of the payroll tax cut with lawmakers getting closer to reaching a deal.

In Europe, the Italian Senate gave PM Mario Monti final approval on the budget package while ECB Executive Board member Bini Smaghi said that the bank should use quantitative easing if economic conditions justify it, “in particular in countries facing a liquidity trap that may lead to deflation”. The common currency trade mixed across the board and nearly unchanged against the buck with EUR/USD currently around the 1.3050 level. EUR/CAD dropped after breaking the long term support level that we noted in yesterday’s NY Session report. The pair now approached February lows which may provide the next level of support in the near term.

The final revision to U.S. 3Q GDP showed that the economy expanded at a slower rate than initially thought. Q/q annualized growth was revised down to 1.8% from the prior estimate of 2.0%. The drop was due to downwardly revised personal consumption which came in at 1.7% from the prior 2.3%. Weekly initial jobless claims continued to move lower with the most recent print at 364K which was down from the prior 368K (cons. 380K). Other data released today included the December final University of Michigan consumer confidence which rose to 69.9 from the previous 67.7 and US leading indicators which rose 0.5% in November (cons. 0.3%). The October house price index fell by -0.2% m/m vs. expected +0.2%. On balance, the data was mostly positive with markets responding by demanding risk.

U.S. equities finished to the upside for the third consecutive session with the Dow Jones Industrial Average advancing by about +0.53% while the S&P 500 rose by around +0.84%. Commodities were mixed with declines in the precious metals while oil moved higher by about +0.82%. Gold fell by -0.63% and silver dropped -0.92% at time of writing. UST yields were mixed with the short end of the curve rising while longer dated Treasury yields fell, flattening the curve.

There is relatively light economic data flow for the upcoming Asia/Pacific session with only New Zealand money supply figures for November and China’s MNI December flash business sentiment survey scheduled for release.