USD - The dollar is headed into the weekend higher against all 16 of its most actively traded counterparts. The break higher comes after encouraging economic data has investors paring back bets that the Fed will ease monetary policy further. U. of Michigan confidence came in above forecast at 73.6, up from 72.3 in the previous reading. After two consecutive months of decline, this month's advance may indicate that consumers are feeling better about the outlook for the labor market and relatively low prices. Moreover, improved consumer confidence suggests that retail sales could continue to gain after data released earlier this week showed an unexpected pickup in July. Elsewhere, a gauge of leading indicators outpaced expectations, gaining 0.4% versus the 0.2% that was anticipated. This is positive for the dollar as the outlook for Q3 economic growth in the US improves.
EUR - The euro fell back towards the lower end of its recent ranges in early trading as German Chancellor Merkel's stance on regional "bailout" terms shows signs of easing. While Merkel is facing staunch opposition from her German coalition members, continued underperformance in Greece is forcing her to consider a bit of leniency on the terms of the nation's financial aid package. On one side of the German divide, policymakers are insisting that forced austerity measures must be pared back as the Greek economy falls ever deeper into recession. Meanwhile, more conservative lawmakers are insisting on a more draconian path. "Greece must stick to its agreements. If the 'troika' says the situation there is not in order, then there can be no money. It's as simple as that." While it appears Merkel's inner circle feels there is room for negotiation, with the Chancellor herself facing an election in 2015, it remains to be seen how lenient she can be. However, as one lawmaker put it, "as long as the government isn't ready to question the composition of the Eurozone, there is no other choice" than to support Greece. Meanwhile, Germany's approval of the ECB's plan to directly purchase sovereign debt in Spain and Italy remains unclear. Consequently, the EUR will likely remain within its recent ranges in the near term.
GBP - The pound is lower against both the EUR and USD this morning after BoE member Fisher suggested that the Bank could increase its asset purchase program. Meanwhile in an attempt to boost confidence, BoE member Weale told reporters that he hasn't heard people say "'this is a disaster'. Rather than describing it as a double-dip recession, I would describe it as a sustained period of stagnation." Not exactly a glowing endorsement of the British economy, leaving the pound vulnerable for further declines.
JPY - The yen edged lower against most of its major counterparts as investor confidence improves slightly. The yen has also steadily weakened as the yield gap between 2-Yr US and Japanese bonds has widened to 20bps, the most since July 3rd.
Commodity Currencies - The commodity linked currencies are lower this morning, but remain towards the top of their weekly ranges. Raw goods are mixed with oil flat at $95/bbl, gold down to $1611/oz, while copper gained to $341/lb. The CAD fell for the first time in four days against the USD after Canadian CPI fell short of forecasts, coming in at -0.1%, thus likely giving the BoC room to remain on hold through the second half of the year. The AUD fell by the most in nearly two weeks after the Australian Treasury stated that the RBA should ease monetary policy if the currency's gains are hurting the economy. The ZAR was the worst performer overnight after violence broke out during a mining strike, leaving more than 100 dead or injured - the worst such violence since the end of apartheid.