v USD is stronger after the Fed's more positive assessment of the economy prompts investors to pare bets on QE3;

v EUR extends its recent declines after a leaked report showed that Greece may miss its fiscal goals in the months ahead;

v JPY slips to an 11-month low against the USD on waning risk aversion and as the yield gap between US and Japanese assets steadily widens.

The USD extended its rally this morning, gaining on the back of good economic news rather than as a reaction to risk aversion as has often been the case over the past several years. The dollar index pushed to its highest level since the middle of January after the FOMC left interest rates on hold yesterday and Fed Chairman Bernanke painted a more optimistic outlook for the US economy. This has eased some of the immediate pressure of a possible third round of quantitative easing, but the outlook for tighter policy remains distant. While the Fed chief did say he was pleased with encouraging progress not only in economic growth, but also in the labor market, expectations remain that the central bank will keep interest rates steady through 2014. Jobless claims have seen significant improvement, and nonfarm payrolls are outpacing last year's performance, but economic growth remains rather anemic with the most recent reading of GDP at +3% in Q4. This suggests that either the GDP numbers are understated and we will see upward revisions and quickening growth in Q1, or it could mean that the surge in hiring has been expectant of faster economic growth and as such could slow in the coming months. The Fed clearly seems to believe the later as they appear committed to proactive support for the economy, albeit not through increased liquidity or asset purchases.

The EUR continued to weaken overnight, albeit it a narrowing range as orders are said to be congested around the key 1.30 handle against the USD. The common currency remains under pressure as concerns over Greece's financial quandary will not fade. Just as the final agreement to provide the embattled nation with a second bailout package has been signed off on, a leaked report this morning shows growing concern amongst the EU/ECB/IMF that there will be large fiscal gaps in 2013-14 under current projections, which could require further cuts of as much as 5.5% of GDP next year. Meanwhile, Eurozone CPI registered in line with expectations at 2.7%, leaving room for the ECB to support the regional economy through further interest rate cuts and/or loan operations. The outlook for the common currency remains murky at best, but it will likely consolidate within its recent ranges as investors struggle to find a viable alternative.

The GBP retreated overnight after the number of unemployment claimants rose more than forecast last month. Claims rose to 7.2k, up from 7.0k last month and higher than the anticipated reading of 5.0k. Today's rise marks the twelfth-straight increase and brings the total number of individuals filing for unemployment benefits to 1.61m. The pound has also come under pressure as demand for safe-haven short-term British government assets wanes, with investors shifting capital out of the UK and into higher-yielding assets.

The JPY tumbled to an 11-month low against the USD on the reduced demand for the yen's relative safety. While there are signs of improvement elsewhere amongst G10 economies, Japan continues to struggle. After the Fed's more encouraging economic assessment yesterday, the yield between 2-Yr US and Japanese treasuries widened to 24bps, the most since last July. As such, capital outflows are likely to increase as Japanese investors look to use their still relatively strong yen to purchase higher-yielding foreign assets. However, the yen's downside remains limited by the ongoing struggles in the Eurozone and any setback they may cause in the market's growing appetite for risk.

The Commodity Currencies are lower against the USD this morning, but generally higher against the majority of their counterparts on increased demand for higher yields. Raw goods are generally lower with oil falling under $106/bbl, gold tumbling to $1645/oz and copper slipping to $383/lb. The CAD pared early gains against the dollar after an unexpected rise in gas inventories in the US weighed on the price of oil, Canada's main export. The AUD and NZD are also both lower this morning on the fall in raw good prices, and also from the lasting effects of the surprising Chinese trade deficit announced earlier this week. While a trade deficit in Australia and New Zealand's primary trading partner may appear to be good news on the surface, the shortfall was more of a product of slowed exports rather than a gain in imports. With the Chinese economy still largely reliant on export growth, a fall in demand from abroad does not bode well for the economies reliant on the financial health of China. The NOK is sharply lower this morning, shedding nearly 1.75% against the dollar after the Norwegian central bank cut interest rates, citing the increased economic pressures from gains in the krone as the primary impetus for the cut. As the eighth largest oil producer in the world, the NOK has come under further pressure as the price of crude pushes lower.





































10-Year Treasury Yield:




 $ 1,649.10

 $ (45.20)


 $ 383.80

 $ (5.85)

Crude Oil: 

 $ 105.97

 $ (0.73)





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.