A raft of corporate earnings reports and a harvest of US economic data kept the early morning action on the boil in New York on Friday. The trading focus remained fixated on the one and only factor that has defined the past seven weeks of chart results for many a commodity: The US dollar and its seemingly relentless descent to now three-year lows.
The euro flirted with the $1.50 pivot point as of this morning, while the Swiss franc climbed to a new all-time record high against the beleaguered buck. The latter was seen trading at the 72.91 level on the trade-weighted index, showing a bit of a sign of stabilizing somewhat, after having plumbed the aforementioned lows against certain currencies. The week’s news highlight will undoubtedly come to be not the royal wedding but the royal “divorce” that is defining the current state of affairs between the Fed and the US currency.
The greenback has now suffered a string of five weekly losses on the index and has shed 3.8% in just the month of April. While the drop has been characterized as “orderly” by currency strategists on CNBC on Wednesday, the 7.6% decline that the dollar has undergone since the start of the current year has been a boon the risk appetite and the orgiastic revelry taking place in the commodities’ space. On the other hand, the 7% gain that gold experienced in just April is nearly twice as large as the dollar’s decline has been, prompting some to point out the obvious, just in case anyone had doubts. As Divyang Shah over at IFR Markets succinctly puts it, “It is difficult to hold a risk-averse stance to the markets when the Fed is keeping the punch bowl filled.” Yes, and this week the Fed spiked the thing with a dash more Wild Turkey.
US consumer spending rose last month, in large part due to the fact that energy and food costs have taken toward the skies. The average price for gasoline surged to $3.90 nationwide in the US as of this morning. Personal income, on the other hand, showed a slowing in growth and recorded only a 0.3% gain. The figure underscores the lack of wage pressure when computing core inflation and it reinforces the Fed’s perception that there is no reason to (yet) fret about inflation. The US savings rate remained stable at 5.5% in the latest reporting period. Finally, the markets also learned this morning that US consumer sentiment improved this month, seemingly ignoring the changing-by-the-minute figures at the gas station.