v USD gains on heightened risk aversion as stocks slip into the red after retail sales grow only 0.4% versus expectations of 0.8%;

v EUR remains under pressure ahead of tomorrow's Ecofin meeting; Moody's downgrades the credit ratings of Portugal, Spain and Italy;

v JPY drops 1% against the USD as the BoJ introduces a further 10T JPY to their asset purchase program; Japanese QE remains comparatively limited.

The USD begins the day higher against all 16 of its most actively traded counterparts as investors grow wary of debt negotiations in the Eurozone. The strength has been further supported as a weak retail sales report weighs on stocks and commodities, prompting investors to seek the dollar's relative safety. Advanced retail sales registered +0.4%, up from last month's flat reading, but short of the +0.8% forecast. The disappointing results were a product of an unexpected sharp drop in the purchase of automobiles despite deep discounts and incentives. With cars stripped out, retail sales advanced by 0.7% as chains like Target and Macy's topped sales forecasts in January. However, while top-line revenues at the big box retailers may be improving, picky customers are squeezing already thin profit margins. The dollar is also getting a temporary boost this morning as Fed member Plosser told reporters that the central bank will probably raise interest rates before late 2014, the most recent date mentioned by Chairman Bernanke. Plosser went on to say that Fed policy hinges on the economy and not a set date.

The EUR is mixed this morning, gaining against the JPY and higher yielding currencies, but falling to its lowest levels in more than a week against the USD. The common currency does however remain largely range-bound ahead of a much anticipated Ecofin meeting tomorrow at which the second Greek bailout is the main focus. Greece successfully passed stringent austerity measures necessary to secure the second round of funding, but European policymakers are now signaling that it may be too little too late. In rather foreboding fashion, German Finance Minister Schaueble told reporters that Europe was better prepared for a Greek default today than it was two years ago. Meanwhile, Moody's downgraded Spain, Italy and Portugal's credit ratings and changed the outlook for the UK and France to negative. However, on a positive note, the German ZEW survey jumped to a 10-month best showing that economic sentiment in the Eurozone's largest economy is at least improving.

The GBP continued its weekly decline against both the USD and EUR after Moody's put the UK on watch for a credit rating downgrade. Reports this morning showed that British inflation slowed by more than expected and the housing market remained sluggish as a gauge of house prices remained at -16. This puts British officials in a difficult position as they must lower government spending or else suffer a credit ratings downgrade, but stagnant economic growth threatens to send the nation into recession. As Chancellor of the Exchequer George Osborne told reporters, it [is] a reality check. It's yet another reminder that Britain doesn't have an easy way out of its economic problems.

The JPY is sharply lower this morning, shedding over a percent against the USD, after the BoJ unexpectedly eased monetary policy further. While interest rates will remain on hold at 0% - 0.1%, the BoJ will inject another 10T JPY into its asset purchase program bringing the total to roughly 65T JPY, or nearly 14% of Japanese GDP. While a large increase in the total size of the operations, the BoJ's quantitative easing program remains far smaller than that of its peers. In 2011, the BoJ expanded its balance sheet by 11%, but the Fed's grew by 19%, the SNB's by 33% and the ECB's by 36%.

The Commodity Currencies are mixed this morning with the AUD, NZD and ZAR all falling while the CAD gained by 0.1%. Raw goods are generally lower with oil flat at $100/bbl, gold down to $1722/oz and copper falling to $383/lb. The CAD was one of the only currencies to gain against the USD overnight as unrest in the Middle East keeps the price of oil, Canada's main export, well supported. The higher-yielding AUD, NZD and ZAR all pared recent gains on heightened risk aversion and as the outlook dims for the Australian, New Zealand and South African economies on falling European demand. The JPY weakness is however supporting the higher yielding currencies as investors use the yen's move lower to enter carry-trade positions.





































10-Year Treasury Yield:




 $ 1,724.60

 $ 1.60


 $ 383.15

 $ (1.55)

Crude Oil: 

 $ 100.93

 $ 0.01





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.