The US Dollar is mixed, but generally lower this morning as financial markets look to close the month on the upswing. However, much of the move higher in equities and commodities has come on increased speculation that the Fed is moving closer to pursuing additional rounds of economic stimulus. Economic data this morning generally fell short of expectations, with investors squarely focused on the labor market. Private payrolls provider, ADP, reported that the private sector added 91K jobs in August, short of the 100K expected, and down from last month's 109K addition. A separate survey showed that companies have increased their outlook for layoffs by 47% from August of last year. Investors will be paying particularly close attention to the nonfarm payrolls and unemployment reports due this Friday, with any weakness greatly increasing the likelihood that the Fed may enact some sort of stimulus measures. However, a gauge of Midwest manufacturing and a factory orders index beat expectations, registering 56.5 and 2.4% respectively - a bright spot in an otherwise disappointing month of data. Any action to ease monetary policy or expand the Fed's balance sheet further will likely weigh on the dollar. While it is unlikely that the USD is headed for the same 9.5% contraction that was seen between Fed Chairman Bernanke's Jackson Hole speech last summer and the November 2010 Fed meeting when QE2 was announced, the dollar will likely remain under pressure against most of its major counterparts ahead of September's Fed meeting.

The EUR is also lower this morning as Eurozone officials remain unable to reach a consensus on expanding the region's bailout fund, the EFSF, and on extending Greece further financial support. In the meantime, economic conditions are quickly worsening as member nations push through stringent austerity measures. Data this morning showed that broad Eurozone unemployment unexpectedly jumped to 10% and regional consumer confidence fell by more than expected. Meanwhile, CPI held steady at 2.5%, thus showing no immediate pressure on the ECB to raise interest rates further. With prospects for slow growth and steady interest rates, the EUR has been unable to break its recent ranges despite increased speculation that the Fed may soon announce another round of economic stimulus in the US.

Sterling is relatively flat despite the continued string of disappointing economic reports coming from the UK. A survey released yesterday showed that consumer confidence in Britain continued to decline, albeit at a slightly slower pace than expected. The pound has also come under pressure over the past week and a half, as demand for British government bonds wanes with volatility in global equity markets subsiding. Yields remain near their lowest ever, but have rebounded by nearly 8% from earlier in August.

The JPY got a boost in early trading after the disappointing economic reports out of the US. However, it remains deeply entrenched within its recent ranges as yen-bulls don't appear willing to test PM Noda's tolerance for a stronger currency in his first week in office. His track record as Japan's Finance Minister shows that he is willing to be proactive in combating a higher yen, but opinion within Japan may be showing signs of a shift towards accepting a stronger currency. A former currency official told reporters this morning that if there's no way around a strong yen, it would be good to make the most of it. Japanese companies should invest directly overseas and the government should support that.

The Commodity Currencies are all higher this morning, benefitting from a rebound in risk sentiment and rising equity and commodity markets. Oil continued to grind higher to just over $89/bbl, gold rose to $1828/oz and copper extended its recent rally another 1.75% to $420/lb. The CAD gained on the rising price of oil, Canada's main export, and after data showed the Canadian economy expanded by more than expected. GDP increased by 0.2% M/M, extending its growth rate to 2.0% on an annualized basis, better than the 1.9% pace expected. The AUD and NZD were also both higher this morning, cutting their monthly losses against the USD. Both high-yielding currencies have come under pressure in the second half of August on growing concerns that the global economy is teetering dangerously close to a double-dip recession. Both the AUD and NZD have cut their monthly losses to just over 2% from nearly 8% at their worst. Similarly, the ZAR has reduced its monthly decline to roughly 4% from nearly 10% at its lowest, with the positive move coming from encouraging remarks from South Africa's Finance Minister. Pravin Gordhan told reporters that South Africa should and will take further steps to encourage international mining juggernauts like Anglo American and BHP Billiton to invest more in South Africa, the world's largest platinum and chrome producer and Africa's biggest gold exporter. Not only will this benefit the country's bottom line, but it will be a boon to the labor market, helping the South African government in reaching its goal of reducing unemployment by 10% by 2015.


































10-Year Treasury Yield:




 $ 1,828.70

 $ 1.20


 $ 419.75

 $ 7.45

Crude Oil: 

 $ 89.21

 $ 0.31





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..