Dollar Surges, Bonds Ease on ISM Data

U.S. 10-year Treasury bonds fell sharply today
after an ISM manufacturing index came in unexpectedly lower today in the U.S.
Traders were looking for the ISM index to rise to 51, but the number actually
came in at 54.7, beating consensus expectations. Bonds shot up the day before on
a weak consumer spending report, but the ISM report today seemed to instill
confidence in the U.S. economy.

The dollar surged over the euro and touched
2-week highs against the yen, after the ISM manufacturing index rose more than
expected. The dollar fell yesterday against the euro, despite a weak German
sales report; soft inflationary data from the U.S. drove the dollar lower. The
dollar also surged against the yen on the ISM news, touching 2-week highs before
giving up some gains. The U.S. dollar bounced off of lows against the Canadian
dollar, to rally higher on the positive manufacturing report. The Canadian
dollar has been moving consistently higher against the dollar since near the end
of March, and hit monthly lows yesterday and today. The strength of the
manufacturing report released today helped to boost the dollar, though.

Crude oil futures fell nearly 2% today, on
speculation that tomorrow’s energy report will show higher inventories of crude.
During this time of the year, refineries typically shut down for cleaning and
repairs to gear up for high demand levels over the summer. Crude stockpiles
build up while the refineries are shut off, and today, traders bet that
tomorrow’s report would show an added surplus of crude, which drove prices
lower. Natural gas futures fell about 1.8% on continued mild weather in the U.S.

Gold futures fell about 1% on a rising dollar
today. Gold usually moves inversely to the dollar and with oil; today, dollar
strength led traders to sell gold in favor of the U.S. currency. Copper jumped
over 2% as the Peruvian miner strike continues to spread.

Grains traded mixed today. Soybeans rose 1.5%,
wheat gained fractionally and corn fell over 2%.


In April, U.S.
manufacturing levels grew at fastest pace in close to a year.

John Lee

Associate Editor