Weekly Jobless Claims drop and ADP Private Payrolls gain - both strong signs before tomorrow's NFP and Unemployment reports; ISM non-manufacturing falls short of forecasts;

EUR breaks below 12-month low after weak demand at French debt auction highlights persistent funding concerns;

Commodity Currencies pull back from recent highs against the USD on falling raw good prices and after data shows a marked slowdown in trade activity.  

The USD begins higher against most of its major counterparts with the Dollar Index rising to 80.95, its highest level in more than a year.  Again, mixed data is providing support for the USD while investors seek safety as European funding concerns take center stage.  This morning has been full of labor market reports here in the US, with most signs pointing to a recovery that is finally gaining momentum.  Private payrolls provider, ADP, released its monthly gauge of employment change, with it registering far better than expected +325k versus the median forecast of +178k, and up from last month's reading of +204k.  Weekly jobless claims also showed signs of improvement, dropping to 372k from 387k last week.  The data is in line with recent economic data showing a pickup in the manufacturing sector, but today's ISM non-manufacturing report suggests that improvement in the economy will be uneven.  The index improved by less than expected, registering 52.6 versus a forecast of 53.0.  Nevertheless, risk sentiment remains the driving force behind currency price action, and as such, the USD continues to benefit from its safe-haven status with growing concern that Europe's debt crisis will depress global growth in the year ahead.

The EUR broke below key resistance this morning at 1.2850 - the lowest level reached against the USD in 2011.  The common currency is now at its weakest level against the dollar since September of 2010, only several months after Greece received its first bailout package and concerns were rising about Ireland and Portugal needing assistance as well.  Today's concerns are that the same struggles with debt are now taking their toll on the region's larger, supposedly more stable economies such as Italy, Spain and now France.  Weak demand at an auction of French government securities has caused borrowing costs to surge higher.  Moreover, with most market participants back from holiday, talk of Greece leaving the Eurozone is once again heating up.  Greek officials have suggested that they will leave the currency bloc if a second bailout package cannot be agreed upon by March when a large debt payment is due.  With little progress yet made, there is little willingness to hold long EUR positions in the near term.

The GBP diverged again overnight, falling against the USD, but gaining to a 15-month best against the EUR.  The sterling has been one of the main benefactors since the EUR stumbled in the second half of 2011, gaining by the third most against its G10 counterparts behind only the USD and JPY.  This flight to quality was reinforced by data released by the BoE this morning showing that foreign purchases of British government bonds totaled GBP 16.3B in November, the highest monthly total since September 2008 after the collapse of Lehman Brothers.  With October's totals factored in as well, the figure is the highest since records began in 1982.  While the pound will likely remain well supported against its mainland European counterpart, it will remain under pressure against the safe-haven USD and JPY with expectations that the BoE will expand their asset purchase program in February. 

The JPY is weaker against the USD this morning, but reached a fresh all-time high against the EUR as investors lose their appetite for riskier assets.  The yen eased back above the 77 handle against the dollar on renewed expectations that the BoJ will intervene in currency markets should the currency strengthen any further.  With ongoing concerns about the pace of global growth and mounting debt in Europe, the yen will remain well supported despite Japan's own economic struggles.

Despite recent resilience, the Commodity Currencies broke below their recent ranges this morning on waning risk tolerance.  Both equities and commodities are in the red today with oil dropping back to $102/bbl, gold down to $1608/oz, and copper continuing its recent slide to $339/lb.  The CAD weakened for a second straight day versus the dollar as the price of oil, Canada's main export, fell and as rising yields in the Eurozone prompted investors to turn to the perceived safety of currencies like the USD and JPY.  The AUD and NZD both dropped by more than a percent against the USD in early trading as trade data showed the effects of slowing global growth.  The Australian trade surplus narrowed by more than expected to AUD 1.38b from AUD 1.4B in the previous month, and far from the forecast of a gain to AUD 1.6B .  Moreover, an index of Australian service activity registered 49, its third straight month below 50 - the division between expansion and contraction.





































10-Year Treasury Yield:  




 $  1,605.80

 $   (6.90)


 $    339.55

 $   (3.90)

Crude Oil: 

 $    102.13

 $  (1.09)





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.