v EUR pares gains as concerns persist that Greece still will not meet the laundry list of requirements that must be met before the EU/ECB/IMF releases the nation's second bailout;
v USD relatively flat as safe-haven demand is largely offset by a weaker existing home sales report;
v JPY weakens to above 80 against the USD for the first since August on declining economics in Japan and on easing risk aversion.
The USD is stronger against all but two of its major counterparts this morning with the dollar index gaining a quarter of a percent, as risk sentiment wavers after yesterday's temporary relief rally. While markets breathed a collective sigh of relief after the EU/ECB/IMF approved a second bailout package for debt-stricken Greece, attention has turned to implementation difficulties that lie ahead. However, with little major economic data to provide support out of the US today, the dollar has remained towards the lower end of its recent ranges. Existing home sales data came in slightly below expectations at 4.57M versus a forecast of 4.66M, but still representing a 4-month best. But with the previous reading revised down to 4.38M, the January number represents at 4.3% gain from December. US data has been steadily improving in 2012 with the labor market showing signs of growth, manufacturing revving up and stocks rallying, but rising gas prices and an expected fiscal drag as local governments continue to aggressively reduce spending threaten to at least slow the progress being made.
The EUR is marginally lower this morning, but traded through a particularly volatile overnight session as investors weigh the benefits of the new Greek bailout against the ill effects of the checklist of reforms demanded by Greece's creditors. The faltering state has been given nine days to meet a laundry list or requirements in order to access the fresh tranche of EU/ECB/IMF funding. The demands include dozens of prior actions that Athens failed to live up to in the terms of the country's first bailout such as sacking underperforming tax collectors, tightening rules on bribery and selling a number of large state-controlled companies. However, Greek lawmakers face increasingly violent protests. This morning, Greek Finance Minister Evangelos Venizelos urged citizens to put behind us this sense of misery and despair and build a new national social contract. It remains to be seen if Greece can enact the slew of social reforms and spending cuts in just nine days, but for now it appears that most investors are expecting a positive outcome with the EUR relatively well supported towards the top of its recent ranges.
The GBP is sharply lower this morning against both the USD and EUR after the release of the minutes from the BoE's latest policy meeting. Sterling fell to a 10-week low against the EUR after the meeting records showed that two policy makers had pushed for a larger increase in the Bank's QE program. Adam Posen and David Miles both voted for a 75B GBP increase in the Bank's asset purchase fund, significantly higher than the 50B GBP that was finally agreed upon. As such, the pound has weakened significantly with the comments proving to be surprisingly dovish. Since the Bank announced the increase in purchases at the beginning of the month, investors had begun to bet that the scope for further easing was narrowing. But with key members of the MPC pushing for further liquidity, the GBP's downside risk will likely prevail in the near term.
The JPY weakened past the key 80.0 handle for the first time since last August. The correction lower comes as rallying global equity markets encourage investors to exit safe-haven positions and seek higher yields. The yen is also under pressure after Japan posted a record trade deficit in the final quarter of 2011. Finally, the BoJ's actions to unexpectedly ease monetary policy last week have provided further impetus to sell the yen. Nevertheless, with investors still generally concerned that the Eurozone is not out of the woods just yet, and that the global economy is set to slow further in the months ahead, the recent yen weakness may prove to be short lived.
The Commodity Currencies are generally lower this morning as investors are concerned that the global economy is slowing. Raw goods are generally lower with oil flat at $106/bbl, gold falling to $1755/oz and copper declining to $383/lb. The CAD is lower this morning as the price of oil, Canada's main export, declined and after a report yesterday showed that retail sales contracted by 0.2%. The AUD and NZD are both lower despite yesterday's rebound in risk appetite as the global economy shows continued signs of weakness. The MXN weakened to a one-week low against the dollar as continued concerns about the EU prompts investors to increase bets that demand will slow for Mexican exports.
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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.