v US weekly jobless claims registered better than expected at 367k, the lowest since June '08; Fed Chairman Bernanke hints at further monetary easing;
v EUR remains well supported despite signs that Greek debt talks may be stalled and as European officials raise concerns that the region's other steps to build a firewall are too little too late;
v JPY remains within 1% of its all-time high against the USD after the Fed pledged to keep interest rates low through 2014 making the reduced cost of Japanese assets increasingly attractive.
The USD consolidated towards the lower end of its recent ranges against most of its G10 counterparts, while remaining under pressure against higher-yielding emerging market currencies. Investors were left in the lurch after Fed Chairman Bernanke hinted that the Fed could pursue further economic stimulus as the economy grows at a frustratingly slow pace in his testimony before the House Budget Committee, but gave no clear signal of definite plans. Bernanke went on to confirm that the US economy remains susceptible to external shocks, like the ongoing debt crisis in Europe. While Bernanke said he was pleased with easing inflationary pressures, he was not satisfied with progress on the other half of the Fed's dual mandate as unemployment remains unacceptably high. He went on to say that while unemployment is a serious problem in the US, the Fed actually has little control over the labor market. They can provide liquidity and help create conditions conducive to hiring, but ultimately private sector decisions are made at the corporate level. Meanwhile, weekly jobless claims registered better than expected at 367k versus last week's 379k, and continuing claims dropped to 3437k from 3567k in the previous reading. However, a private report showing planned job cuts gained by 38.9% year over year, up from last month's 30.6%.
The EUR slowed its gains overnight, but remains near the top of its recent ranges with the 1.3250 level against the USD providing significant resistance. With expectations of a final plan for restructuring private sector involvement debt by the end of the week, investors are growing jumpy as Eurozone members downplayed debt talk progress. Further shaking confidence that the Eurozone may have finally turned a corner, ECB member Juncker told reporters that the steps to tackle the debt crisis adopted at a summit on January 30th were largely insufficient. However, the common currency found support after Chinese Premier Wen Jiabao reiterated that China supports the EFSF, but is still researching the best way to participate in the bailout fund.
The GBP begins the day relatively flat against both the USD and EUR. After yesterday's surprisingly strong British PMI Manufacturing report, PMI Construction released this morning also showed unexpected gains last month as new business increased, boosting employment in the sector. The GBP also remains well supported as a primary alternative to its mainland European counterpart as debt talks with Greece appear to be stalled. With the British economy beginning to outperform expectations, albeit at a very modest level, the GBP is proving to be increasingly attractive.
The JPY remains near the top of its recent ranges this morning despite increased rhetoric from Japanese authorities. Japanese Finance Minister Azumi told reporters that he will take a bold action if needed, and counter speculative moves. However, with the Fed's commitment to keep interest rates low until at least the end of 2014, the attraction of short-dated JPY assets will likely prove too attractive for another round of BoJ yen selling which will likely prove to be another temporary blip rather than a reversal of the trend.
The Commodity Currencies are generally well supported this morning in their new higher ranges as investors look for higher yields. Raw goods are generally lower with oil down to $96/bbl, copper at $382/lb and consumables slipping into the red. The CAD remains slightly stronger than the USD, but has come off its three-month highs against its North American counterpart as stocks and commodities swing from gains to losses. The AUD and NZD are also both relatively flat this morning, remaining well supported after yesterday's encouraging manufacturing data out of China. As the main destination for Australian and New Zealand exports, the health of the Chinese economy is paramount to AUD and NZD strength.
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.