- Dollar dives after S&P puts UK on notice
- US jobless claims fall 12,000 to 631,000, continuing claims set new record
- Philly Fed survey improves in May but less than expected to -22.6
- US leading economic indicators rise 1.0% in April from -0.2% in March
- Geithner: My basic obligation to put policies in place that sustain confidence in dollar
- Treasury to auction $101 bln in 2, 3, 5 and 7 year debt next week
- Nikkei: Japan to make JPY 4 trln in emergency loans to corporations
- Pimco’s Gross fears US to lose AAA rating drove markets lower today
- US 10-year note yield rises 20 bp to 3.37% on supply, ratings fears
- S&P says US ratings outlook same as January
- S&P falls 1.7%, Gold rises to $954, oil falls to $61.00
The dollar rallied on risk aversion in early US trade, helped by jitters over S&P move on the UK.The strength was short-lived and the greenback lost its safe-haven status as the session wore on and traders began to look at the mountain of US debt the market will have to swallow in the months ahead. The reflation trade ceased to be a focus while debt and deficits became the nexus for the market.
EUR/USD dipped to 1.3730 where it was scooped up by sovereign demand. Prices moved to new session highs in early afternoon trade after the Treasury announced a massive $101 in auctions for next week. The dollar bonds and stocks all fell in synch. Bill Gross confirmed on the wires that credit jitters were feeding the selloff. EUR/USD rose to 1.3923 on near-panic buying, USD/JPY fell to 93.96, and cable recouped all the ground lost on the S&P news and made new highs for the move at 1.5890.
Look for tough sledding ahead for the dollar as corporate accounts adjust to the prospects of prolonged dollar weakness.
