The US Dollar is mixed this morning, paring much of its weekly losses against its higher-yielding peers, but remaining under pressure against safe-haven assets. The drop off in risk appetite comes as disappointing earnings reports from the likes of 3M and Netflix drags stocks into the red, and unexpectedly weak economic reports shakes investors' assurance. A gauge of US consumer confidence tumbled to the lowest since 2009 when the economy was in the depths of a recession, posting a reading of 39.8 versus an expected 46.0 and last month's 46.4. Limited job availability, home values that continue to decline and the escalating uncertainty in Europe led to the pessimistic outlook. The falling number has consumer goods companies worried just two months ahead of the most important period of the year, the holiday shopping season. The home price index also fell, registering -0.1% versus the expected gain of 0.2%. Moreover, last month's relatively strong +0.8% reading was downwardly revised to flat. The Richmond Fed manufacturing index also disappointed, posting a decline of 6.0 versus an expected gain of 1. Finally, stocks and most commodities slumped this morning after a key Eurozone summit scheduled for Wednesday was ostensibly canceled. Much of the recent risk-on rally had been based on gaining hope that Eurozone leaders were close to resolving the region's debt problems. But with no meeting to transpire, policymakers' pledges to solve the ongoing crisis appear to be no more than rhetoric.
The EUR declined this morning for the first time in six days, falling from a six-week high, but remains relatively well entrenched towards the top of its recent ranges. The move lower came as risk appetite fell by the wayside, and on renewed fears that Eurozone policymakers are no closer to resolving the region's debt crisis. However, it does appear that some progress is being made behind closed doors, but with Eurozone leaders asking private holders of Greek bonds to take a 60+% haircut, an easily accepted solution is clearly not at hand. German lawmakers are set to deliberate several strategies that would leverage the EFSF's total purchasing capacity. However, with all proposed plans inevitably falling heavier on the better capitalized, AAA rated Northern Eurozone members, the willingness of German taxpayers to foot the bill of increasing liquidity remains paramount. The AAA countries Germany, The Neltherlands, Austria and Finland have signaled that they won't consider putting up very much in fresh cash, Austrian Finance Minister Maria Fekter told reporters. We're committed to our contribution, but the measures can't cost much more than that because we've got to look after our AAA ratings.
Sterling is also lower this morning, but by a smaller percentage after breaking above the key 1.60 barrier for the first time in two months. The pound has shed some of its early gains on the decrease in risk appetite, but has remained relatively well supported against its Eurozone counterpart as one of the primary alternatives to the EUR. With no major economic data due in the UK, cable will likely remain divided, gaining against the EUR, but pairing its overnight gains against the USD, at least in the near term.
The JPY remains precariously positioned at the very top of its historical ranges on the increase in turmoil in global financial markets. The announcement that the Eurozone leaders had canceled their summit scheduled for this Wednesday spurred investors to seek the yen's relative safety. However, as expected, Japanese policymakers are quite outspoken this morning, threatening market intervention and bold action if necessary. However, the effects of BoJ intervention have proved temporary at best over the past eighteen months, and as such, investors continue to flock to the safe-haven JPY.
The Commodity Currencies are off their recent highs this morning despite mixed results in commodity markets. Oil spiked higher today by more than 3% to $94/bbl after a stockpile report showed a shortage of oil at key US storage hubs. Gold gained to $1685 as investors sought the precious metal's perceived safety. However, copper fell to $336/lb and consumables were generally in the red on the renewed fear of a pending global economic slowdown. The CAD has traded through a particularly volatile morning, initially touching parity with the USD on the surging price of oil. However, the loonie has since cut those gains, and tumbled back to its lowest levels in nearly two weeks after the BoC kept interest rates on hold and cut its economic growth outlook. The AUD also fell back from its recent highs on the drop in investor risk appetite, but remains towards the top of its recent ranges on renewed optimism that the economy of China, Australia's largest trading partner, may be bottoming. The NZD was the worst performer against the USD overnight after a report showed that New Zealand inflation slowed by more than expected suggesting that the RBNZ will keep interest rates on hold at this week's meeting.
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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.