EU leaders propose new treaty that would build a fiscal pact amongst member nations; the UK abstains from participation;

US trade deficit narrows for the fourth straight month as imports slowed and exports gained;

JPY extends trend of slow appreciation as speculation builds that the BoJ may not be considering intervention unless the yen nears the previous all-time high of 75.35.  

The US Dollar traded through a volatile overnight session, but is heading into the weekend within its recent ranges.  All eyes are on European leaders and their lack of clear consensus, thus providing support for the USD as a safe-haven investment.  Meanwhile, US trade data showed the deficit shrinking to the lowest level this year, dropping by 1.6% from last month.  The contraction can be attributed to an increase of petroleum sales and record exports to China and Latin America, suggesting that growing demand for American goods in developing nations will help cushion the fallout from an economic slowdown across the Atlantic.  University of Michigan consumer confidence also beat forecasts, registering 67.7, a six-month high, versus 64.1 in the previous reading.  While the uptick suggests consumers are feeling better about the outlook for the US economy, the gauge remains far from its 89 average in the five years leading up to the 2008 recession.

The EUR has traded through a highly volatile Asian and European session, but remains within its recent narrow ranges.  A much anticipated EU leaders summit drew to a close today with calls for a new treaty that would build fiscal unity.  However, despite a majority's approval, disagreement amongst key EU members likely foreshadows the struggles ahead to ratify and institute any of the proposed measures.  UK Prime Minister David Cameron told reporters at the conclusion of the summit that there was a fundamental disagreement, and the delegation from Finland threatened to pull their contribution to the EFSF should changes to decision-making protocol be introduced.  Nevertheless, the decision to add an additional EUR 200B in IMF funding is a welcome development, but will likely have little impact should Italy or Spain need assistance.

The GBP also remains within its recent ranges after a volatile European session.  UK PM David Cameron distanced himself from his EU peers as he chose to vote against fiscal consolidation amongst the 27 members of the Union.  After the momentous decision, he told reporters, We wish them well.  My judgment was that what was on offer just wasn't good enough for Britain.  It's better to allow those countries to do their own thing on their own.  Cameron's differences were predicated on needing assurance that the UK would receive veto power in the new treaty to protect the UK's financial interests.  The 17 Eurozone nations were unwilling to provide that guarantee. 

The JPY extended its trend for slow and steady appreciation as the developments in Europe spur demand for its perceived safety.  Developments in Europe and increased signs that the global economy is slowing have spurred increased demand for JPY-denominated assets, and may cause the USDJPY exchange rate to again test the 75.35 all-time low, reached back in late October.  The effects of the strong yen have been clearly seen in data released recently with Japan's trade deficit widening to JPY 2,363.4 billion compared to a surplus of JPY 5,685.8 billion in the same period last year.  However, the impact of BoJ intervention has been rather limited.  Records show that the central bank sold JPY 9,091 billion in November, an unprecedented amount, and yet the JPY remains within 1% of where it was trading two months ago just before the intervention.

The Commodity Currencies are relatively well supported this morning with the biggest gain seen in the ZAR.  Oil gained to $98.70/bbl, gold rose to $1723/oz and copper recovered to $355/lb.  The CAD is slightly higher this morning after the encouraging data out of the US, Canada's main trading partner, and on the rising price of oil, Canada's main export.  Similarly, the AUD and NZD are relatively flat this morning as global stocks and commodities reverse yesterday's declines.  The ZAR was the best performer of the group, gaining by more than a percent against the dollar as investors were encouraged by the developments in the EU, the main destination for South African exports. 





































10-Year Treasury Yield:  




 $                  1,722.00

 $                 8.30


 $                      355.00

 $                 5.70

Crude Oil: 

 $                        98.67

 $                 0.31





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.