USD Hits Fresh Record Lows

The dollar stumbled to new all-time lows against the euro beneath the 1.43-level and crossed the 2.05-threshold versus the sterling for the first time since late July. The renewed weakness in the greenback comes amid heightened expectations that the FOMC will move again at the end of this month to lower its benchmark lending rate. Fed Funds futures reflected a 70% probability of a rate cut at the upcoming FOMC meeting on Oct 30-31. The trade-weighted dollar index dropped to a new low at 77.48 with few signs to suggest an imminent recovery. Further dragging sentiment for the dollar were lingering concerns of credit conditions with Bank of America reporting dismal Q3 profit, which plunged 32% from a year earlier.

Economic data from the US continued to reinforce deteriorating fundamentals. The reports included weekly jobless claims, September leading economic indicators and the October Philadelphia Fed survey. Weekly jobless claims edged up higher to 316.5k versus 310.25 a week prior. The leading economic indicators for September reversed the 0.6% decline from August, improving to 0.3%. Meanwhile, the Philadelphia Fed survey slipped by more than anticipated to 6.8, versus estimates for a smaller decline to 7.3 from 10.0 in September. The new orders component tumbled to 2.7 from 15.1, while the prices paid index almost doubled to 40.3 versus 23.1.