EUR - The common currency came under renewed pressure overnight, heading for its worst weekly decline against the dollar in six months. The declines come a day after the ECB cut interest rates by 0.25% to an all-time low at 0.75%. However, while the currency's diminished yield advantage certainly makes it less attractive, it's the region's continued struggle with sovereign debt that has put the euro under such pressure over the past several months. Debt yields are yet again on the rise in struggling Spain and Italy, with their 10-Yr notes gaining to 6.95% and 6.01% respectively. Moreover, policymakers are struggling to get their fiscal houses in order as pro-growth and pro-austerity measures are proving to be equally unpopular. Case in point, Italian PM Mario Monti changed course overnight with his cabinet abandoning a planned hike in value added taxes in favor of more than €26B in government spending cuts. While popular at the consumer level, the two largest Italian unions have already threatened to strike as the cuts will affect workers' benefits. Similarly, French President Hollande's government tries to sidestep last week's calls from the national auditor to cut government spending by nearly €50B which could derail his campaign against austerity. As such, a retest of the EUR's recent lows against the USD at 1.2288 may be in store.
GBP - Sterling continued to diverge overnight, gaining to a four-year high against the EUR, but weakening against the USD. The pound's advance against the EUR comes as investors favor the relative safety of British assets as the Eurozone debt crisis roils on. However, the USD's role as the primary safe-haven instrument continues to trump the attractiveness of GBP-denominated investments.
JPY - The yen continued to strengthen overnight, supported by the deterioration in investor sentiment. However, gains in the yen may be limited as Japanese policymakers will likely become increasingly outspoken about the woes of a strong yen as it pushes back towards its yearly highs against both the USD and EUR.
Commodity Currencies - Despite the recent declines in financial markets, the commodity currencies are relatively well supported within their recent ranges, albeit towards the lower end. Commodities are lower with oil falling back to $84/bbl, gold down to $1590/oz, and copper slipping to $341/lb. The CAD declined on the falling price of oil, Canada's main export, and after the disappointing jobs report out of the US, Canada's main trading partner. Similarly, the MXN is lower after the US data, but losses have been limited as expectations of quicker Mexican inflation are prompting investors to cut bets that the central bank will lower interest rates further. The AUD pushed back towards the lower end of its ranges as investors bet that the RBA may not be done with its easing cycle as the outlook for the global economy worsens.