US weekly jobless claims increased for the first time in a month, but the four-week moving average continued its steady decline to 375K -  the lowest since June 2008;

Italy's second straight day of debt auctions was not nearly as successful as the first, with an undersubscribed offering driving the yields on Italian debt higher;

Commodity Currencies are relatively flat as stocks and commodities push into the black; ZAR is best performer overnight as rising inflation prompts investors to increase bets of tighter monetary policy in Africa's largest economy.  

The USD is lower against most of its major counterparts this morning as the week's volatility continues.  Stocks and commodities recovered early from yesterday's steep selloff as home sales exceeded expectations.  The sale of new houses gained 7.3% after last month's 10.4%, far better than the 1.5% increase that was expected.  However, on an annualized basis, the measure declined to +6.9% from +7.3% in the previous reading.  Weekly jobless claims were also released this morning, but registered slightly worse than expected at 381K versus the forecast for 375K.  It's also the first time the measure has increased week over week in the past month.  Nevertheless, the four-week moving average did continue to decline, dropping to 375K, the lowest level since June 2008, suggesting that the labor market is on the mend.  However, it still remains to be seen if the drop in applications for unemployment benefits will translate into increased payroll numbers in the coming months. 

The EUR is slightly lower this morning, but is well off its overnight lows as equities turn positive.  The precipitous fall during the Asian and European trading hours came after Italy held another large bond offering today, but was unable to attract enough demand to cover all the securities up for auction.  As such, Italian yields are yet again on the rise, with the 10-Yr bond rising above 7%.  Investors are also beginning to price in further interest rate cuts from the ECB, which despite its benchmark rate already being at historic lows, still has room to cut further and/or introduce a more formalized quantitative easing program. 

The GBP weakened this morning, edging closer to its yearly lows, reached back in September at 1.5343.  The drop comes in thin holiday liquidity and as investor risk appetite remains weak at best.  With no major economic data released so far this week to persuade investors otherwise, the current outlook for the British economy in 2012 is not a bright one.  With economic activity grinding to a halt, and inflation remaining persistently high, the UK's economics are not attractive.  However, with the threat of many of AAA rated Eurozone countries losing their coveted credit rating, the relatively stability of the cable and the UK's top mark will prove attractive as sovereign wealth funds and global investors diversify their EUR holdings.

The JPY is higher this morning, gaining against the USD and reaching a fresh all-time high against the EUR despite rising stocks and commodities.  Risk appetite remains tepid with the ongoing debt crisis in Europe prompting investors to seek the yen's relative safety.  However, the Japanese economy continues to struggle as it recovers from the devastating natural disasters earlier this year.  Industrial production declined by more than expected, dropping 2.6% after last month's gain of 2.2%, dragging the measure into negative territory on an annualized basis.

The Commodity Currencies are slightly stronger this morning, but remain towards the lower end of their recent ranges.  Oil was flat at $98.75/bbl, copper gained to $340/lb, but gold extended its recent declines, dropping another 2% to $1533/oz.  The CAD gained slightly on the improved price of oil, Canada's main export, and after the positive housing data out of the US, Canada's main trading partner.  The loonie also touched an eleven month high against the EUR after the disappointing Italian bond sale sent investors looking for alternatives to the common currency.  Currencies such as the CAD and AUD, from AAA rated non-European nations have increasingly been garnering flight to quality demand.  As such, the AUD is slightly higher this morning after avoiding a break below parity with the USD during yesterday's volatile session.  The ZAR was the best performer against the USD overnight on signs that the rand's steep annual drop (nearly -19%) is benefitting the country's exporters and commodity producers.  However, the weaker currency is leading to imported inflation as retailers pass on price increases for foreign goods.  It remains to be seen how the RBSA counteracts rising inflation while also protecting against slowed demand from Europe, the main destination for South African exports.





































10-Year Treasury Yield:  




 $   1,533.60

 $   (32.80)


 $    338.00

 $    0.35

Crude Oil: 

 $   98.75

 $   (0.65)





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.