v USD falls after U. of Michigan Confidence gains to 75.3 and new home sales rise by 321K;

v Eurozone PMI falls to 49.7, but EUR breaks above 1.34 as investors remain focused on the strong results from yesterday's German IFO report;

v Commodity Currencies remain within recent ranges despite the sharp rise in raw good prices as investors do not expect the resulting uptick in inflation to spur a policy tightening cycle in the world's leading economies.

The USD looks to close out the week on the defensive with the dollar index heading for a 1.5% decline over the past five days on the generally improved risk sentiment. The recent rally in global equities and commodities was further supported this morning by positive data out of the US and the general lack of news out of the Eurozone. University of Michigan confidence jumped to 75.3, the highest reading in more than a year, but remains well below the gauge's pre-recession average of 89. New home sales also surprised to the upside, gaining to 321K, but was slightly lower than last month's upwardly revised reading of 324K. While the reading is the strongest since December 2010, the overall pace of home sales remains slow at best. Investors also have their sights set on rapidly rising commodity prices. However, while crude oil could make a run at $110/bbl in the near term, which is translating to the highest seasonal gas prices on record, all signs point to the Fed keeping policy on hold for the foreseeable future.

The EUR extended its recent gains against the dollar this morning, breaking above 1.34 for the first time since early December. The move higher comes as confidence builds that Greece will meet all the prerequisites of their second bailout package, and that the threat of an imminent default is quickly fading. Moreover, yesterday's strong German IFO report suggests that Germany, the region's leading economy, will avoid a technical recession after the economy contracted in Q4 '11. However, data this morning further highlighted the two-speed growth in the Eurozone with PMI slipping to 49.7. A reading below 50 represents a contraction. The Eurozone economies are also facing the building headwinds of rising oil prices as the spread between WTI and Brent has widened to more than $15. However, unlike last spring which also saw oil prices push higher, the ECB appears less likely to raise interest rates to combat inflation. In fact, investors remain positioned for further central bank easing with nearly 0.5% in further cuts currently expected by the end of the year.

The GBP is sharply higher this morning against the USD, but remains under pressure against the EUR after British GDP registered in line with expectations. Data showed that the UK economy shrunk by 0.2% in Q4, a somewhat positive development as further decline would suggest that a technical recession is all but a foregone conclusion. With the recent pickup in British manufacturing and surprisingly strong orders for the nation's exports, it appears that the economy is gaining momentum in the first quarter of the new year.

The JPY extended its recent declines against the USD and EUR, having shed 1.75% and 4% respectively so far this week. The drop comes as FX volatility declines to a 4-year low, encouraging investors to seek higher-yielding assets. However, technical indicators suggest that the yen's sharp declines have been overdone and it is now undervalued against the majority of its major counterparts.

The Commodity Currencies are surprisingly flat this morning despite the rising price of raw goods. Oil continued its recent ascent, topping $108/bbl for the first time since last May, copper spiked higher to $388/lb and consumables were generally more expensive. The CAD is surprisingly flat despite the soaring price of oil, Canada's main export, after comments from BoC Governor Mark Carney suggested that Canadian interest rates could be held steady for at least the next seven quarters. The AUD pared early gains after Fitch Investor Services unexpectedly cut the credit ratings of three major Australian banks - Australia Bank, Westpack and Commonwealth Bank of Australia. The ZAR was the best performer of the group, heading for a second-straight weekly advance against the dollar amid signs that the global economy is recovering, boosting the prospects for South Africa's export-led economy.





































10-Year Treasury Yield:




 $ 1,775.50

 $ (9.40)


 $ 388.00

 $ 6.60

Crude Oil: 

 $ 108.15

 $ 0.35





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.