- US housing starts fall 12.8% in April from 8.5% in March; at record lows
- Belgian consumer sentiment rises to -19 in May from -22 in April
- BOC’s Murray: Risks of both inflation and deflation exaggerated; central banks will turn off the spigots
- ECB’s Stark: Freefall has passed, pick up next year; eying inflation risks
- UK’s Brown: General election would not solve expenses scandal: Reuters
- Fed’s Stern: Solid growth a year away; slower declines next two quarters
- Southern California median home price falls 35.8% versus year ago, 51% from peak
- S&P closes down 0.2%, 10-year notes up +6 bp in yield to 3.25%
The dollar fell broadly this morning, rebounded after “disappointing” US housing starts data before edging lower again in NY afternoon trade.
EUR/USD pulled back to 1.3560 after the US housing data but realization that the US needs more houses like a a hole in the head helped spark a rebound. Also helping spark a rebound was solid demand from sovereign names, particularly from Russia which intervened to replenish its reserve hoard again today. They converted a chuck of the $4.5 bln they bough into EUR/USD, helping underpin the pair on dips. The US dollar index edged through 82.00 support today, sparking EUR/USD buying late in the day, but we failed to follow-through and prices stalled in the 1.3665 area again.Options-related selling was rumored into strength this afternoon.
Cable was in heavy demand during the US morning with US custody banks the most high-profile buyers. They bought pounds and sold EUR, AUD and CAD against them, traders reported, but those cross components all performed strongly in their own rights today. AUD/USD reached a new trend high at 0.7784 this afternoon. Heavy demand for short-dated GBP calls was seen today, particularly 2-week 1.57 calls.
US equities traded strongly most of the afternoon but slumped at the close. Combined with the failure of the USD index to close below 82.00, this may help spark more dollar demand in early Asia.
