Dollar Surges, Bonds Ease on ISM Data

By John Lee

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