The US Dollar regained its footing this morning against a number of its major counterparts as the frenetic oil trading begins to calm. While the political situation in North Africa and the Middle East is far from settled, it appears that the recent protests in Libya have done little to slow global oil production. Equities are also in the black this morning for the first time in nearly a week as investors' risk appetite returns, albeit slowly. Economic data in the US also sent mixed signals with 2010 Q4 GDP growth being revised down to 2.8% from 3.2% as state and local governments reigned in spending. However, excluding inventories, the economy grew at a 6.7% pace, the most since 1998, and on an annualized basis, the world's largest economy grew 2.8%, the most in five years. A separate report showed that consumer confidence continues to post gains, beating forecasts with a reading of 77.5 versus the anticipated 75.5.

The EUR slipped back towards the lower end of its recent ranges as oil prices begin to moderate. Focus has once again shifted towards the Eurozone's unresolved debt crisis as fears recede that unrest in Libya would impede global oil production. Impeding elections in Ireland have markets worrying that the second recipient of joint EU-IMF bailout funds will look to renegotiate their massive loans. However, rising inflation throughout the region will provide significant support for the common currency. A day after German inflation registered above expectations, a report showed that Belgian prices quickened to the fastest pace in more than two years. Mounting price pressures throughout the region have underpinned expectations that the ECB will hike rates before the Fed, which would boost the euro's yield advantage.

Sterling pulled back from its recent yearly highs as data showed that the British economy shrank by more than previously expected in the fourth quarter. Markets were taken by surprise in January when the initial reading of 2010 Q4 GDP showed that the UK economy shrunk by 0.5%, and most investors wrote off the number as heavily skewed by inclement weather. However, this morning's revisal of the number to an even worse -0.6% has investors paring bets that the BoE will have room to tighten monetary policy. BoE Governor Mervyn King's stance that expectations for higher rates are overblown appears to be valid, and will likely see the pound test the lower end of its ranges in the near term.

The JPY and CHF drifted lower from their recent highs as investors assumed riskier positions, albeit cautiously. As worries ease that oil production will slow, investors have begun to shed long yen and franc positions in favor of equities and higher-yielding currencies. However, both safe-haven currencies will likely remain supported towards the high end of their ranges with persistent fears that unrest will spread to other Middle East nations, including Saudi Arabia.

The commodity currencies have benefitted this morning on investors' resurgent risk tolerance and stable commodity prices. Oil has pared its recent spike above the key $100 barrier, and appears to have stabilized just below at $97, at least for the time being. Copper prices have recovered their weekly declines as lower oil prices have investors more optimistic about the outlook for the global economy. Gold prices have however declined 0.3% as the precious metal's appeal as a hedge against volatility in both equities and currencies wanes. The AUD, NZD, CAD and ZAR will likely continue their push back towards their recent highs as investors again focus on the slow, but steady, global economic recovery.

02/25/2011

CURRENT

CHANGE FROM CLOSE

EUR/USD

1.3751

0.46%

USD/JPY

81.71

0.12%

GBP/USD

1.6067

0.48%

USD/CAD

0.9801

-0.26%

USD/MXN

12.1107

-0.30%

USD/CHF

0.9287

0.31%

AUD/USD

1.0159

-0.69%

NZD/USD

0.7514

-0.48%

10-Year Treasury Yield:

3.4291%

(0.0186)

Gold:

1,410.60

(5.20)

Copper:

439.75

7.20

Crude Oil:

97.35

0.07

DJIA:

12,129.31

60.75

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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.