The US Dollar is lower against most of its major counterparts other than the safe-haven JPY as the market's appetite for risk swings into positive territory.  The uptick in optimism comes after Germany's lower house approved the expansion of the Eurozone's bailout fund to backstop the region's debt plagued periphery and also add enough firepower to assist larger economies, like Italy and Spain, should it be needed.  Investors also found support in better-than-expected economic data out of the US.  The final reading of Q2 GDP picked up to 1.3% from 1.0% last month, better than the 1.2% reading that was expected.  The measure's core price index also unexpectedly gained to 2.3% versus last month's 2.2%.  While this is by no means a sign of runaway inflation, the higher-than-expected numbers do serve to at least abate any fears of deflation in the near term, a concern that has reemerged amongst investors as the global economy teeters on the brink of a double-dip recession.  Personal consumption gained by 0.7%, up from 0.4% in the previous reading, and weekly jobless claims fell by more than expected to 391K versus last week's 428k.  However, a gauge of consumer confidence fell to    -53.0 versus an expected reading of -51.0 as volatile stock and commodity prices weigh on sentiment.  While the developments in Germany and the upbeat economic data are a welcome relief, the underlying deficiencies in the global economy persist, and as such the dollar will likely remain in its recent ranges in the near term, albeit towards the lower end.

The EUR is higher against most of its major counterparts this morning after the positive developments in Germany.  The vote now moves to the upper house of the German parliament, with a successful vote expected.  While the expansion of the EFSF itself doesn't do much for Greece or any of the other struggling economies in the short term, it does serve to boost investor confidence and allows Eurozone officials to focus in on more pressing matters.  Even still, a recent poll showed that 93% believe that Greece will eventually default, and 40% see the currency bloc loosing at least one member in the next year.  Nevertheless, the uptick in optimism will likely keep the common currency relegated to its recent 1.35 - 1.37 range with a bias to the upside.

Sterling is higher against both the USD and EUR this morning on a report that the Swiss National Bank will raise its percentage of sterling holdings in its portfolio of foreign currencies.  While the SNB gave no specific time frame other than in the next year, expectations of sterling-buying have provided support with no economic data released to dissuade sterling-bulls. 

The JPY is slightly lower this morning as rising stocks and commodities reduce demand for the safe-haven yen.  However, despite the recent weakness, the yen remains precariously close to its all-time highs against the USD, and Japanese officials continue to signal to the market that they are diligently monitoring the situation.  While much attention has been paid to the yen's appreciation against the USD over the past 18-months, it recently reached a new high against the EUR as well.  With a large portion of overseas sales made in the Eurozone countries, large Japanese companies are concerned with the effects of a strengthening yen on a global basis. 

The Commodity Currencies are all marginally higher this morning as investors tepidly reenter higher-yielding, but riskier, positions.  Oil gained to $82.45/bbl, gold was up to $1616/oz and copper rose to $324/lb.  The CAD posted a modest gain this morning on the rising price of oil, Canada's main export, and after the data out of the US suggested that Canada's main trading partner continues to expand, albeit slowly.  The AUD and NZD are both higher against the USD and JPY after gains in Asian equities spurred demand for higher-yielding currencies.  Gains in the Aussie were however tempered by a disappointing labor market report, and an index of leading indicators remained in negative territory.  The ZAR also extended its recent gains against the USD after a report showed that prices paid by producers gained by more than expected, extending its annual rise to 9.6%.  Combined with the positive news out of the Eurozone, the main destination for South African exports, the rand has gained as investors seek its favorable interest rate yield. 

09/29/2011

CURRENT

CHANGE FROM CLOSE

EUR/USD

1.3645

-0.73%

USD/JPY

76.78

0.22%

GBP/USD

1.5688

-0.72%

USD/CAD

1.0322

-0.13%

USD/MXN

13.4601

-0.72%

USD/CHF

0.8942

-0.67%

AUD/USD

0.9819

-0.39%

NZD/USD

0.7765

0.03%

USD/ZAR

7.9091

-0.26%

USD/CNY

6.3965

0.03%

10-Year Treasury Yield:  

2.0057%

0.0261

Gold:  

 $ 1,614.50

 $ (1.60)

Copper:  

 $   324.00

 $   0.25

Crude Oil: 

 $    82.56

 $   1.35

DJIA:  

11,188.13

176.42

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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..