v The dollar is lower against its European and Asian counterparts, downtrodden following yesterday's weak housing and manufacturing data;
v EUR extended gains as investors closely monitor Greek's debt negotiations with private creditors;
v AUD and NZD showed slight gains, but remain in ranges of near three-month peaks against the greenback.
The USD remains largely sidelined this morning as traders anticipate debt talks in Greece to turn positive even as discussions remain unresolved. The dollar is lower against its European and Asian counterparts, downtrodden following yesterday's weak housing and manufacturing data. Odds continue to increase that the Fed may yet pursue a third round of quantitative easing. Without any major market movements or economic data releases in the US today, markets are anticipating the successful breakthrough of the Greek government's talks with private creditors.
The EUR extended its weekly gains against the dollar this morning as investors closely monitor Greek's debt negotiations with private creditors which have growing expectations of a positive outcome. Many speculate that the initial discussion could result to an agreement which may reduce the amount of debt the country owes to its private creditors.
The euro has risen more than 2% this week, posting gains after three weeks of losses and putting it on track for the biggest weekly advance since mid-October after solid bond auctions in Spain and France on Thursday boosted risk appetite. The euro is likely to stay supported in the near-term as investors await word on the Greek talks.
A positive outcome to the talks is expected to boost the euro even further near-term, although investors remain wary about the risks of the region's debt crisis deteriorating further. Any negative news could see investors re-establish bearish bets.
The GBP soared to a two-week high against the dollar, extending gains into a fifth straight day, although sharper gains were checked by concerns over the fragile UK economy which may require more monetary stimulus. In the near term, the pound will remain supported by foreign demand for the perceived safety of British government assets, but limited by general economic underperformance.
BoE policymaker Ben Broadbent was quoted as saying that Britain's economy is broadly flat and growth is likely to be volatile for much of 2012.
The JPY which was the best performer in the second half of last year has also started to give back some of those safe haven driven gains over the past week against the non-US dollar currencies. This has helped provide some temporary relief for Japanese authorities as the yen continues to remain broadly stable against the US dollar and Chinese yuan with both countries accounting for over a third of Japanese exports.
The BoJ will meet next week and likely downgrade its economic growth forecast for the fiscal year ending in March, reflecting the two-month slump in exports. The BoJ could also unveil further stimulus measures as early as next month.
The Commodity Currencies were mixed, as the Canadian dollar weakened against its US counterpart after data showed Canada's inflation rate eased more than expected in December, giving the BoC more breathing room to cut interest rates if the economic outlook worsens. The Australian and New Zealand dollars showed slight gains on Friday, but remained in ranges of near three-month peaks against the greenback, as a broadly stronger euro struck a wave of positive sentiment across the currency markets. Despite the chances of an economic slump in the Eurozone nations, Australia's terms of trade index is likely to remain elevated, proving that global demand for key commodities should help the resist against global economic pressures.
CHANGE FROM CLOSE
10-Year Treasury Yield:
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.