USD - The dollar continues its strong performance vs the major currencies, buoyed by improving domestic economic conditions and safe haven flows amid uncertainty amid credit concerns in Europe. The US economy continued to show signs that the pace of recovery is accelerating. GDP grew a robust 3.2% in Q1 while Consumer Confidence rose strongly to 57.9 in April, raising hopes that consumers maybe more willing to begin spending again. The thaw in consumer confidence was borne out in today's US Consumption figures which rose 0.6% in March. The dollar also benefitted from continuing uncertainty surrounding Greece's bailout package as both Greece and Portugal were downgraded by ratings agencies, heightening risk aversion. The dollar appears well situated to maintain its gains as both improving domestic economic fundamentals and debt concerns hanging over Europe drive investors into the greenback.
EUR - The euro remains under pressure as investors remain skeptical of a rescue package for Greece. The single currency fell from peaks at 1.3340 overnight to lows at 1.3156 following the announcement of a EUR 110 billion coordinated Euro Zone/IMF bailout for the beleaguered nation that will stretch over the next 3 years. Market reaction to the rescue package was modest with Greek bond yields easing only slightly. The spread between Greek vs. German 10-year bonds fell to 610 basis points from 662 on Friday. The rescue comes on the heels of ratings agency Standard and Poor's downgrade of Greek debt to junk status and downgrade of Portugal's credit rating, raising concerns that other Euro Zone countries at risk will also require assistance. How the Euro Zone will resolve the mounting deficits of its lesser performing member countries is casting a pall on the region, its currency and threatens to derail its fragile recovery.
GBP - The British pound sterling is trading steady as U.K. markets were closed for a holiday. The pound is likely to remain under pressure due to uncertainty over growth, the fiscal outlook, and this Thursday's UK election. The Liberal Democrats will probably get a very good result, but the risk of a 'hung parliament' remains. Expect the pound to remain weak in the near term.
JPY - The Japanese yen is trading softer as Japanese financial markets were closed today for a holiday. On the economic front, Japan's household spending, wages and job openings rose, while consumer prices fell for a 13th straight month, suggests that growth is steadily picking up but not strong enough to end deflation. This week, the market will eye Japan's vehicle sales.
CAD - The Canadian dollar rose as crude oil reached $87 a barrel and gold at the highest level since December. The loonie is holding up well despite Greek woes. The loonie feel recently on speculation that interest rate talks were overdone. The loonie is expected to remain strong from a domestic perspective as domestic data has been quite positive. Canada's economy grew an as-expected 0.3 percent in February, the sixth straight monthly domestic increase. This Friday, Canadian employers are expected to add 25,000 jobs to payrolls in April.
MXN - The Mexican peso increased against the safe-haven currencies as stocks and commodities rose, encouraging demand for higher-yielding emerging market assets. The Mexican peso, along with all other commodity-linked currencies took a dive on Tuesday after S&P cut Portugal's credit rating. Since the 2.5% drop, the peso retraced back to last week's levels of 12.2700, appreciating 1.5% vs the greenback on improved Europe outlook and rising commodity and equity prices.
AUD - The Australian dollar remains firm vs. the US dollar ahead of tomorrow's Reserve Bank of Australia meeting. Aussie rose to highs at 0.9275 overnight, shrugging off the risk aversion amid the Greek rescue package, on strong domestic fundamentals. Australian housing prices rose 4.8% in 09Q1, continuing its strong performance 5.1% rise in the previous quarter. Markets are forecasting a 60% chance of a 0.25% rate rise tomorrow to bring rates to 4.50%.