The US dollar slid to a 10-week low against most major currencies while world stocks and commodities rallied after President Barack Obama made his speech to the union. Following Obama's State of the Union address, the Dow Jones industrial average rose 0.29%, S&P 500 was up 0.48%, and the Nasdaq Composite Index gained 0.74%. The announcement also brought broad selling pressure of the dollar on news of the President's proposal to freeze portions of the federal spending.

Meanwhile, the Commerce Department reported new home sales jumped 17.5% to a seasonally adjusted 329,000 unit annual rate in December, much higher than the forecasted 300,000 units and reached its highest level in eight months in December.

The euro traded at a 2-month high vs. the USD on speculation that interest rates will rise sooner in the Eurozone than in the US. While the ECB continues to warn the public about rising inflation in the region, the US has promoted its monetary easing policy that has supported a near-zero interest rate. Meanwhile, the EU's Statistics Office Eurostat reported industrial orders in the Eurozone rose 2.8% higher than expected, resulting in a 19.9% y/y growth in November. However, the Purchasing Managers Index (PMI) in the region showed little signs of improvement while input prices showed upward pressures in January's flash survey.

The British pound gained slightly against the USD after minutes from the Bank of England's policy meeting reported policymakers supporting an interest rate hike. The minutes showed BOE Monetary Policy Committee (MPC) member Martin Weale joined Andrew Sentence in voting for a 0.25% rate rise, which stimulated talks of a rate increase in coming months. The lower than expected preliminary Q4-GDP of 1.7% y/y will raise concerns about whether the UK economy is fit to withstand the government's planned deficit cut and a hike in interest rates.

The Japanese yen gained slightly against the USD after the Bank of Japan kept its rates on hold at 0-0.1% and revised its forecast for CPI and GDP for the year. The BOJ increased its price forecast for the year due to rising commodity prices, but predicted a slow exit from deflation. In addition, the raised forecast lowered expectations of imminent monetary easing.

The Canadian dollar strengthened against the USD after world stocks and commodity prices rallied in the aftermath of US President'sCompose speech. Following Obama's State of the Union address, oil prices, Canada's key export, rebounded upward by $1.28 to reach $96.53 a barrel. With limited Canadian data release this week, investors are paying close attention to US home sales data, as the housing market is seen as a key to the US economic recovery.

The Australian and New Zealand dollars traded flat against the USD after Australian consumer prices rose less than expected, suggesting interest rates in the region might not rise for months to come. Australia's consumer price index (CPI) rose just 0.4% in Q4 which was the smallest increase in almost two years and much lower than the forecast of a 0.7% rise.

Indications of Overnight rates:

EUR/USD

1.3730

USD/JPY

82.09

GBP/USD

1.5929

USD/CAD

0.9920

USD/MXN

12.0360

USD/CHF

0.9416

AUD/USD

0.9981

NZD/USD

0.7701

10-Year Treasury Note Yield: 3.413%

Dow Jones Industrial Average: 11, 984.83 + 0.06%

This market summary is prepared by Union Bank's Global FX Department for the general information of its customers. It is based on the most accurate information currently available, but should not be considered investment advice or a guarantee of future exchange rates or trends.