US Q4 '11 GDP misses forecasts, registering +2.8% versus+ 3.0% expected;

EUR higher as Greek debt talks progress; Portuguese debt comes into question with yields spiking to a fresh all-time high;

JPY bounces back from losses earlier this week, nearing an all-time high against the GBP as foreign purchases of short-term Japanese assets surpassed Japanese investor outflows.

The USD consolidated towards the lower end of its recent ranges against most of its major counterparts.  Stocks and commodities are off to a shaky start after the most recent reading of US GDP fell short of expectations at 2.8%, but was much higher than the 1.8% pace recorded in the third quarter.  A disappointing holiday shopping season and government spending cuts led to the underperformance, but the data does provide some validation for the Fed's decision to keep rates on hold for the next two to three years.  Nevertheless, University of Michigan confidence registered better than expected at 75 versus 74 in the previous reading.  Dovish commentary from Fed policymakers is also taking its toll as expectations grow that QE3 may be closer than previously thought.

The EUR looks to be headed for its second-straight weekly gain against the USD as confidence builds that a deal to extend a second bailout to Greece is at hand.  EU Economic and Monetary Affairs Commissioner Olli Rehn, told reporters that Greece was close to reaching an agreement with its creditors, but final private sector involvement remain unclear.  The common currency's upside potential also remains limited as investors begin to price in further monetary easing in the coming months.  ECB President Draghi told reporters at the World Economic Forum in Davos, Switzerland that they don't yet know if the Bank's record injection of liquidity into the banking system is finding its way into the real economy.  He went on to say that there is a lag, but that we know for sure we have avoided major credit crunch and a major funding crisis.  While the central bank's operations may have eased improved interbank credit conditions, a report released this week showed that loans to households and companies contracted by 0.7%, the most since the records began in 1991.  The ECB will offer a second round of three-year interbank loans on February 28th.

The GBP consolidated against both the USD and EUR this morning as investors focus on US economic growth and the ongoing Eurozone debt crisis.  The pound saw steep overnight losses against the JPY as the pair approached an all-time low, with the weakness thus permeating across the other sterling crosses.  With little economic data due in the UK, sterling will likely remain well entrenched within its recent ranges heading into the weekend.

The JPY is sharply higher this morning as investors reverse short yen positions from earlier this week.  This morning's disappointing GDP report out of the US is prompting investors to seek the yen's relative safety, and data released yesterday clearly showed that foreign demand for safe-haven Japanese short-term assets remains high.  Foreigners bought JPY 711.8B worth of JPY denominated assets, surpassing the overall Japanese investor outflow.  Japanese stocks were sharply lower overnight as the yen strength weighs on performance. This spike higher could produce an increase in BoJ interventionist rhetoric at the least if not another spat of yen selling.

The Commodity Currencies are little changed this morning, ending the week at the top of their ranges.  Raw goods are mixed with crude gaining to $100/bbl, gold pushing higher to $1733/oz, but with copper falling to $388/lb.  The CAD is virtually unchanged from yesterday's close as the higher price of oil provides support, but the disappointing GDP data out of the US, Canada's main trading partner, limits any substantial gains.  The AUD is headed into the weekend at the top of its recent ranges as is the NZD after New Zealand unexpectedly posted a trade surplus.  The ZAR looks to close the week as the best performer against the USD, gaining 2.5% after trading in a volatile 4% range.  While gains are being temporarily limited by the weaker than expected reading of US GDP, progress on debt talks in the Eurozone and generally improved risk sentiment will provide significant demand for the higher-yielding commodity currencies.





































10-Year Treasury Yield:  




$   1,729.20

 $   2.50


 $    389.50

 $   (1.75)

Crude Oil: 

 $   100.27

 $  0.23





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.