The US Dollar is evenly split against its counterparts this morning on mixed economic data and gyrating global equity and commodity markets. Weekly jobless claims remained high, but declined to 409K from last week's upwardly revised 421K. Continuing claims also stayed at elevated levels, registering 3735K, markedly higher than the 3681K that was expected. A gauge of construction spending also dropped by more than forecast, contracting by 1.3% M/M versus the expected gain of 0.2%. However, ISM manufacturing came in better than the 48.5 expected at 50.6, which is down only slightly from last month's reading of 50.9. A reading over 50 denotes expansion, and today's number suggests that the economic recovery may be sustained, albeit at a sluggish pace. Moreover, ISM prices paid declined by less than expected to 55.5, showing that inflationary pressures have not completely subsided. After yesterday's better than expected Chicago and Milwaukee PMI data, room for the Fed to enact further economic stimulus appears limited at best. With the reduced prospects of another expansion of the Fed's balance sheet, the USD has recovered against a number of its major rivals including the EUR, GBP and JPY.

The EUR extended its weekly decline against the USD to nearly 2.5% this morning with the Eurozone sovereign debt crisis still representing the biggest downside risk to global economic growth. Greece's ongoing struggles remain the primary focus for international investors, especially after a Greek parliamentary committee released a report stating that Greece's debt has run out of control and government policies are failing to restore finances. Eurozone officials' willingness to provide continued financial assistance to troubled member nations will be heatedly questioned should Greece miss its fiscal targets. The EUR also came under selling pressure this morning after a report highlighted the ECB's record buying of debt when they spent nearly 25B EUR in one week earlier this month to purchase Italian and Spanish government bonds, driving yields away from unsustainably high levels above 6%. In the near term, it appears that the EUR may make a run at the bottom end of its recent 1.40 - 1.45 range, but weak economic fundamentals in a number of the world's other major economies will provide downside support.

Sterling fell for a third consecutive day against both the USD and EUR after British house prices unexpectedly fell, strengthening the case for continued low interest rates and possibly another round of quantitative easing. The average price of a home fell by 0.6% last month after an upwardly revised reading of +0.3 in the previous month. British PMI manufacturing registered in line with expectations at 49.0, but was down from 49.4 in July. With few bright spots in the economy, the BoE is likely considering additional economic stimulus. The MPC lost its two hawkish votes for rate hikes at last month's policy meeting, and investors will pay close attention to the Bank's next meeting scheduled for September 8th to see if a more dovish bias is in fact emerging.

The JPY dropped overnight to a one-week low against the dollar, and pared recent gains against most of it major peers as rallying Asian equities sapped demand for its safety. The rally was spurred on by an encouraging manufacturing report out of China, suggesting that the global economy may avoid a double-dip recession. A report released this morning also showed that the net purchase of foreign assets by Japanese investors spiked last week to the highest levels in almost a year. Moreover, with the JPY unable to make a convincing break above the top end of its recent range (near 77.20), speculation has increased that the BoJ may boost its injections of funds into the financial system as a way to stem the currency's gains and encourage economic growth.

The Commodity Currencies are mixed this morning with the CAD and AUD gaining while the NZD and ZAR both decline. Raw goods were generally lower with oil falling to $88.60/bbl, gold down to $1824/oz and copper paring its recent gains to $412/lb. Despite the slight decline in the price of oil, Canada's primary export, the CAD has steadily appreciated throughout the week and is nearing its strongest levels in nearly a month. With no major economic data due in Canada, the better-than-expected ISM report out of the US, Canada's main trading partner, has encouraged CAD bulls. The AUD has also neared its strongest levels in a month after Australian retail sales unexpectedly beat forecasts. Australian interest rate futures have been steadily paring recent declines throughout the week with swaps currently showing an expected 112 bps in cuts over the next 12 months, down from 123 bps yesterday and 154 bps one week ago. The NZD fell for the first day in three after a report showed that New Zealand commodity prices contracted by more than in the previous month, spurring investors to book profits on the kiwi's weekly advance. The ZAR also declined on lower commodity prices and on increased bets that the RBSA will cut South African interest rates in the coming months as the South African economy slows.


































10-Year Treasury Yield:




 $ 1,826.00

 $ (3.00)


 $ 412.60

 $ (6.10)

Crude Oil: 

 $ 88.64

 $ (0.18)






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..