US GDP expanded at a slower pace than expected in the third quarter, growing 2.0% versus 2.5% initially estimated;

France's AAA rating comes into question after S&P accidentally announced a downgrade over the weekend;

Investors are spooked by rumors of BoJ intervention, but the JPY remains near the top of its recent ranges as investor risk appetite is tepid at best.

The US Dollar begins the day mixed against its major counterparts as investors weigh disappointing economic data out of the US against the growing possibility that the Fed may soon announce further monetary easing measures.  A revised reading of Q3 GDP registered worse than expected at 2.0% versus 2.5% in the previous reading.  Despite relatively resilient retail sales, manufacturing and housing data over the past several months, GDP growth has largely been due to decreased costs and pinched margins as household income declines and job growth remains stagnant.  Corporate profits climbed at a slower pace in Q3 than in Q2 and consumer spending grew at a slightly weaker rate than expected.  Meanwhile, the personal savings rate dropped to 3.8% last quarter, the lowest since the end of 2007 before the economy slipped into recession.  Meanwhile, inflation adjusted after-tax incomes declined at a 2.1% annualized pace, the biggest decline since the last quarter of 2009 when the economy was in the depths of recession.  The Fed also released a new data point this morning, Gross Domestic Income (GDI), which is believed to be a more accurate and relatable measure of economic growth.  The inaugural reading of GDI showed the economy growing at much more modest 0.4% annualized pace.   Richmond Fed manufacturing data was also released this morning at a flat reading, but that was better than the forecast of -2 and up from -6 in the previous reading.  Nevertheless, with stocks and commodities trying to stage a comeback after yesterday's steep declines, the dollar's appeal as a safe-haven asset has waned.

The EUR is marginally higher against most of its major counterparts after an EU official told reporters that he was close to presenting a draft law on creditor writedowns at failing banks within the single currency bloc.  However, the EUR remains relegated to its recent ranges against the USD within a percent to either side of 1.35 as investors continue to lament the region's debt woes.  While member nations enact severe austerity measures as borrowing costs rise in every country in the Eurozone other than Germany, region-wide consumer confidence has dropped to the lowest in more than two years as companies cut jobs ahead of an expected economic slowdown.  The AAA rating of France, the region's second largest economy behind only Germany, has also been called into question after S&P accidentally announced a downgrade that was soon retracted.  Nevertheless, strong capital inflows have provided support for the EUR as European investors repatriated funds at a far greater pace than the historical average in the past three months. 

Sterling continued to grind lower overnight for a third straight day against both the USD and EUR as investors expect that BoE bias is moving towards further easing measures as the economy slows.  BoE member, David Miles, told reporters yesterday afternoon that the UK's economic recovery has stalled and that growth is close to zero.  He went on to say that the real disposable income of the majority of households has fallen significantly; uncertainty about future levels of income has increased sharply.  The pound extended its declines even after a government report showed that the budget deficit narrowed in October as the government cut spending.

The JPY traded through a particularly choppy overnight session, initially falling on speculation that the BoJ was considering another round of intervention, but since paring much of those declines as Japanese officials assure markets that no action is imminent.  Nevertheless, investors appear reticent to buy JPY ahead of the holidays at the end of the week as the threat of a weaker yen keeps buyers sidelined.  With today's weak economic data out of the US, the yen will likely remain well supported, albeit within its recent ranges.

The Commodity Currencies remained mostly lower this morning despite the rebound in raw good prices.  Oil pushed up to $98.33/oz, gold rose to $1702/oz and copper was at $335/lb.  The CAD was the winner of the group, gaining marginally against the USD on the higher price of oil, Canada's main export.  The loonie is also up after Canadian retail sales registered marginally better than expected at +1% for a second month in a row.  The AUD and NZD are both lower this morning on waning investor risk appetite, however the decline has been tempered by increased demand for Australian and New Zealand government bonds.  The yield on Aussie bonds fell to within 9pts of an all-time low as the government assets of the two South Pacific nations are increasingly turned to as attractive safe-havens.  The ZAR was the worst performer overnight, extending its monthly decline against the dollar to nearly 10% after the South African government passed a law that could be used to outlaw whistle-blowing and investigative journalism.  The law threatens a jail sentence of 25-years for anyone obtaining classified information even it its disclosure was in the public interest.  Nevertheless, South African CPI rose to 5.9% in October suggesting that the RBSA will keep interest rates on hold for the foreseeable future. 


































10-Year Treasury Yield:  




 $  1,701.00

 $  20.27


 $    333.60

 $   3.30

Crude Oil: 

 $     97.63

 $     0.70





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.