Daily Summary on USD, Euro, GBP, JPY, CAD, AUD and NZD

By Roger Baettig | June 15 2012 1:13 PM

USD weakens as production and sentiment reported lower than expected.
EUR falls as investors turned cautious ahead of the Greek election this weekend.
Commodity Currencies held within ranges as gold prices gained.

USD - The US dollar is broadly weaker against most major currencies as US production slowed and confidence sank. The New York Fed's manufacturing index fell sharply to 2.29 in June from 17.09 the prior month, the lowest level since November 2011. Furthermore, industrial production in the US unexpectedly fell in May for the second time in three months as factories turned out fewer vehicles and consumer goods. Capacity utilization, which measures what portion of a plant is producing, also fell to 79% from 79.2% in April. In addition, Thomson Reuters/University of Michigan preliminary index of consumer sentiment for June fell to 74.1 from 79.3 the prior month, conveying that US consumers have looming doubts about the recovery of the US economy. The general market's position is risk averse going into the weekend as European tensions rise over the Greek election and the weaker than expected economic data.

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EUR - The euro fell for the first time in four days against the US dollar as investors turned cautious ahead of Sunday's crucial election in Greece, despite global central banks' willingness to step in to counter any adverse fallout from the vote. G20 officials have stated that central banks from major economies are prepared to take steps to stabilize financial markets by providing liquidity and preventing a credit squeeze if the Greek election result shakes up markets. The best case scenario for the euro would be the pro-bailout party winning in Greece on Sunday. A win by the far-left anti-bailout parties could push the euro lower than the $1.2286 struck earlier this month. A coordinated action would likely support risk appetite and provide relief to the single currency, although any relief could prove temporary given Spain's elevated borrowing costs and the risk of contagion to Italy, the euro zone's third largest economy.

GBP - The British pound advanced against the greenback this morning on stronger equities and fixed income markets. Yesterday, BoE Governor Mervyn King presented steps with Treasury to increase the flow of credit to UK banks. The steps include both a funding-for-lending program that would lower borrowing costs for banks that expand their loans to non-financial sector borrowers, and also an extended collateral term repo facility to react to market-wide stress. Governor King also declared that these measures could be stated in conjunction with additional QE, which will likely drive the Sterling further to the downside.

JPY - The JPY strengthened against the USD as risk-averse market players bought back the yen after weaker than expected US manufacturing report and the pending Greek election this weekend. Though top officials from Japan had refrained from commenting on the yen since the beginning of this month, top financial diplomat Takehiko Nakao announced that the ongoing strength in yen did not reflect economic fundamentals and the government would respond to currency moves appropriately. This warning comes after the dollar came under pressure on expectations that the US Fed Reserve may resort to further monetary easing after disappointing labor market data and consumer prices fell in May.

Commodity Currencies - CAD continued to hold within a narrow range versus the greenback, while AUD held above parity in front of the Greek elections set underway. Also supporting the commodity linked currencies were gold prices, which rose modestly with gold futures up $4.10 at $1,623.70 per ounce. In other news, Canadian Manufacturing sales contracted 0.8% during April, below expectations of a positive print of +0.3%. Look for the commodity based currencies to hold close to current levels before the outcome of Sunday's election results in Greece.

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06/15/2012

CURRENT

CHANGE FROM CLOSE

EUR/USD

1.2626

-0.05%

USD/JPY

78.69

0.83%

GBP/USD

1.5650

0.56%

USD/CAD

1.0242

-0.17%

USD/MXN

13.9078

-0.06%

USD/CHF

0.9508

-0.02%

AUD/USD

1.0055

0.32%

NZD/USD

0.7873

0.62%

USD/ZAR

8.3669

0.06%

USD/SEK

7.0027

0.08%

USD/CNY

6.3651

0.08%

10-Year Treasury Yield:

1.58

-3.84%

Gold:

1625.82

$2.10

Copper:

347.84

$6.57

Crude Oil:

83.55

$-0.39

DJIA:

12705.23

53.32

*All rates are indicative of current interbank exchange rates.

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.