- US economic activity in the US picked up in Q3 with GDP gaining by 2.5%;

- EU leaders came to an agreement on recapitalizing regional banks, leveraging the EFSF, and convincing the private sector to accept larger haircuts on Greek debt;

- The Commodity Currencies outperform their peers on the resurgence of risk appetite as global financial markets rally.

The US Dollar is sharply lower against all 16 of its most actively traded counterparts as market risk appetite continues to rebound on positive developments out of Europe. The Eurozone leaders appear to have agreed in principal on expanding the EFSF, recapitalizing European banks and lessening the debt burden on embattled Greece. Combined with today's encouraging economic data out of the US, investors have taken the relief rally as an opportunity to shift capital out of the safe-haven USD and into higher yielding assets. First look Q3 GDP data registered as expected, showing that the economy picked up significantly in the second half of the year with the annualized pace of growth expanding to 2.5% from 1.3% in the second quarter. A major contributor to the gain in growth was increased consumer spending with the personal consumption component of GDP gaining by 2.4% versus last month's slower 0.7%. However, the rate at which US households are saving also dropped in the last quarter to the lowest levels since 2007. With persistently high un- and underemployment, the data suggests that consumers are saving less and spending more to make ends meet as household incomes decline. Weekly jobless claims remained high this morning at 402K, but continuing claims did decline by more than expected. Pending home sales data also showed a sharp contraction, falling by 4.6% after last month's 1.2% decline. As such, investors will pay close attention to the Fed's next move with the FOMC set to meet next week. Hints of more economic stimulus and a rerun of the central banks MBS purchasing program have kept the USD in check.

The EUR is substantially higher against many of its major counterparts this morning as the Eurozone leaders failed to disappoint expectant investors. Despite rumors of stalled talks and even bellicose rhetoric, the Eurozone leaders were able to come together and hammer out an encouraging plan to address the region's woes. The plan tackles three distinct troubles, crises in their own right. I) The private sector holders of Greek liabilities agreed in principal to take a 50% haircut on government debt holdings, however details will be agreed to in the coming period. II) Policymakers agreed to a 9% tier one capital to asset ratio that is to be achieved by Eurozone banks by 2012 with capital first coming from the banks, then national governments, and lastly from the EFSF. III) And finally, Eurozone finance ministers agreed to leverage the EFSF to increase the fund's purchasing power. While the plan is a strong step in the right direction towards backstopping the region's struggling economies, it still does little to address the underlying economic deficiencies that have led to such a precarious economic situation. While the relief rally in global financial markets and growing expectations of more economic stimulus in the US will provide support for the common currency in the near term, its downside risks persist in the longer term.

Sterling is mixed this morning, gaining against the USD, but falling by the most in two weeks against the EUR. The positive developments in the Eurozone and increasingly dovish commentary from British policymakers has kept the pound under pressure. BoE member Paul Fisher telling reporters this morning that the UK economy may be shrinking and that the EU's woes will continue to weigh on the UK economy. Even if we get a silver bullet solution to Europe, I still thought we needed to do something like [the 75B GBP in fresh stimulus] to head of the risk of a slowdown. Looking at the fourth quarter for example, at best it seems to be flat, and could easily have negative growth. British government bonds also fell following the release of the EU communiqué as demand eased for the relatively safe assets.

The JPY gained overnight to a new post WWII high despite BoJ efforts to weaken the currency. The Bank added 5T JPY to an asset-purchase program yesterday afternoon, but the initial reaction was that the measure was too little too late. Rumors are also that the Japanese government is considering a contribution to the Eurozone's bailout fund with the thought that a stronger Eurozone economy will reduce safety flows into the yen. Nevertheless, the yen remains towards the top of its ranges suggesting that the rally in risk-assets may be relatively short lived.

The Commodity Currencies have been the best performers overnight on the back of the encouraging developments out of the Eurozone and the strong GDP figures in the US. With expectations of an imminent global recession quickly fading, raw good prices have spiked. Oil pushed higher to $93/bbl, gold was up to $1730/oz, and copper extended its sharp recovery to $366/lb. The CAD strengthened to beyond parity with the USD on the rising price of oil, Canada's main export, and the improving growth outlook for the US economy. The AUD was the second-best performer overnight, behind only the ZAR, gaining by nearly 3% against the USD as investors sought the Aussie's G-10 leading yield. Similarly, the NZD rebounded from recent losses, pushing up to the highest levels against the USD in more than a month. The ZAR was the best performer against the USD overnight, gaining sharply after the successful summit in the Eurozone, the primary destination for South African exports.


































10-Year Treasury Yield:




 $ 1,735.50

 $ 12.80


 $ 366.30

 $ 17.50

Crude Oil: 

 $ 93.26

 $ 3.05





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.