USD - The dollar is mixed this morning as investors weigh the likely depreciative effects of a possible third round of quantitative easing against signs of a broader global economic slowdown. The dollar has sold off against its G4 counterparts after minutes from the Fed's last meeting revealed that further easing is "warranted soon," unless the economy shows signs of "substantial and sustainable growth." However, St. Louis Fed President Bullard quickly planted seeds of doubt, describing the minutes as "stale." "I think the markets have the idea of some gigantic action. I'm not sure if the data really warrants that," said Bullard. In line with his more hawkish view, weekly jobless claims registered close to estimates, coming in at 372K after last week's reading of 368K. Moreover, new home sales gained by more than expected, rising to 372K versus 359K in the previous reading. Finally, the house price index gained 0.7% m/m after last month's downwardly revised reading of 0.6%. Nevertheless, stocks are lower this morning after a raft of negative economic data out of both Europe and China, which in turn is providing support for the dollar against many of its higher-yielding growth-sensitive counterparts.
EUR - The euro edged higher, rising to a fresh six-week best against the USD, as the prospects of QE3 in the US provides support. A slew of data released across the Eurozone suggested that the currency bloc is headed for its second recession in three years as consumer confidence and business activity both continue to decline. Eurozone consumer confidence tumbled to -24.6 from -21.5 last month as rising unemployment and a worsening outlook for the economy limits households' willingness to spend their hard earned pay checks. French President Hollande and German Chancellor Merkel are set to meet in Berlin today to discuss ways to stave off immediate crisis as concerns over Greece's economy are again the main focus. French policymakers insist that the conditions of Greece's "bailout" packages are too harsh and are stifling growth. Conversely, German officials insist that giving Greece more time would equate to lending more money - an unpopular request in the region's largest economy. Meanwhile, Greek officials are scrambling for ideas on how to resuscitate the ailing economy and generate government revenue. The latest plan is to sell several of the country's outlying islands. While this may improve the government's finances in the short term, the windfall would likely not be material enough to alter the longer term outlook for the troubled economy.
GBP - The pound is mixed this morning, falling against the EUR while gaining slightly against the USD. The gain versus the dollar came after a private report showed that mortgage approvals jumped to 28.4K from 25.9K in the previous reading, highlighting an improved outlook for the troubled UK housing market.
JPY - The yen strengthened back towards the higher end of its recent ranges overnight as the selloff in global financial markets provides support. The yen has also gained versus the USD as rising expectations of QE3 has narrowed the yield gap between short-term bonds in both countries. However, the yen's gains have been limited as investors were reminded of the nation's precarious debt situation. Demand at a government auction of 20-Yr bonds fell to the lowest since 2009 as Japanese life insurers sought higher yields elsewhere. As the largest investors in Japanese bonds, falling domestic demand could ultimately weigh on the outlook for the Japanese economy.
Commodity Currencies - The commodity linked currencies are mixed this morning as investors weigh falling stocks against rising raw good prices. Oil pushed higher to $97.70/bbl, gold surged to $1671/oz, and copper rose to $350/lb. The CAD fell back towards the bottom of its recent ranges this morning despite the rising price of oil, Canada's primary export. Options data also suggests that the loonie's run may be losing momentum, with traders paying the most in nearly a month to protect against a decline versus the USD. The AUD is lower after Resources Minister Martin Ferguson declared that the nation's mining boom "is over" with Chinese demand easing. With less reliance on the Chinese economy, the NZD gained the most against the USD on the higher price of commodities.