The US Dollar is lower this morning against most of its major counterparts other than the safe-haven JPY on gaining market risk appetite. Stocks have pushed into the black this morning, after yesterday's modest losses on a better-than-expected earnings report from internet giant Google, and a strong retail sales report released this morning. Retail sales gained by 1.1% versus last month's 0.3% rise, better than the 0.7% expected. With the volatile automotive and fuel components stripped out, the measure gained by a more modest 0.5%, flat from last month's reading. However, University of Michigan confidence unexpectedly fell from 59.4 to 57.5, the lowest level since 1980, and was far short of the 60.2 forecast. Despite the improved sales numbers, the confidence report suggests that consumers are increasingly fearful of another economic downturn with home prices falling, ongoing weakness in the labor market and policymakers fumbling with ideas on stimulating the economy. Nevertheless, with stocks and commodities in positive territory this morning, the dollar will likely remain under pressure against most of its peers as we head into the weekend.

The EUR is sharply higher this morning, reaching its best levels against the USD in nearly a month as optimism builds that a plan to backstop the regions struggling economies is near. Investors have been encouraged as global financial leaders are set to meet this weekend to discuss the use of the newly expanded EFSF and also potentially boosting the IMF's lending to the Eurozone nations. However, the region does remain on watch, with S&P most recently downgrading Spain's sovereign credit rating from AA to AA-, citing a weak banking sector and slow economic growth. Heading into the weekend, expect the common currency to remain well supported against the safe-haven USD and JPY, albeit within its recent ranges.

Sterling is mixed this morning, gaining against the USD, but falling against the EUR ahead of a key G20 meeting this weekend. The improvement in market sentiment has led the pound higher against the safe-haven USD as investors turn to higher-yielding currencies, but the gaining appetite for risk has benefitted the EUR more. With no major economic data set for release heading into the weekend, the pound will likely remain within its recent ranges with improving risk sentiment providing support, but an expected increase in BoE asset purchases providing resistance on the top side.

The JPY is sharply lower against most of its major counterparts this morning on waning risk aversion and after a report suggested that Japanese officials will unveil steps to curb yen strength in the coming days. While the BoJ's efforts to weaken the yen have not proved sustainable over the past twelve months, investors fear being caught long the yen in the case of another three or four percent gap lower. As such, rhetoric remains a powerful driving force for the yen, but with the global economy slowing and Europe still struggling under the burden of its debt, a complete reversal in the yen's overall bullish bias remains highly unlikely.

The Commodity Currencies are generally higher this morning on gaining optimism that global financial leaders are building consensus on helping struggling European nations. Raw goods are all pushing higher this morning with oil rising to $86.50/bbl, gold was up to $1670/oz and copper rose to $339.50/lb. The CAD rose to its best levels in nearly two weeks on the rising price of oil, Canada's main export, and on the sharply better-than-expected retail sales data out of the US, Canada's largest trading partner. The AUD extended its recent gains, pushing higher above parity with the USD on improving investor confidence. The NZD also rose overnight ahead of this weekend's much anticipated G20 meeting. However, the AUD and NZD gains appear to be highly speculative, especially just a day after abysmal trade data out China, the main destination for Australian and New Zealand exports.

10/14/2011

CURRENT

CHANGE FROM CLOSE

EUR/USD

1.3861

-0.61%

USD/JPY

77.35

0.58%

GBP/USD

1.5794

-0.18%

USD/CAD

1.0133

-0.75%

USD/MXN

13.2655

-1.23%

USD/CHF

0.8923

-0.66%

AUD/USD

1.0305

-1.11%

NZD/USD

0.8022

-0.84%

USD/ZAR

7.8579

-0.25%

USD/CNY

6.3791

-0.06%

10-Year Treasury Yield:

2.2459%

0.0625

Gold:  

 $ 1,669.20

 $ 1.90

Copper:  

 $ 339.85

 $ 9.60

Crude Oil: 

 $ 86.43

 $ 2.20

DJIA:

11,560.33

82.16

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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.