USD - The dollar is stronger against nearly all of its major counterparts this morning as resurgent concerns over the health of the global economy spurs on a flight to safety. With no major data to persuade investors otherwise, demand remains strong for the dollar on the general outperformance of the US economy and on its continued status as the default global reserve currency. However, the USD's upside potential remains limited by lingering expectations that the Fed may be closer to a third round of quantitative easing than many expect. Last week's rather disappointing nonfarm payrolls report suggested that the above trend employment numbers throughout Q1 reflected an unseasonably warm winter with the numbers now appearing to normalize. While the economy continues to add jobs, a period of protracted growth in Europe and a slowdown in emerging markets could further dim the outlook for the US labor market. As such, investors will look to this Friday's PPI and next Monday's CPI reports for the most recent read on inflation. If prices appear to be in check, expectations will likely rise that the Fed may consider further monetary easing.

EUR - The euro weakened for the seventh straight day against the USD on concerns that Greece will not be able to form a new government. Elections in several Eurozone nations left the political balance in the lurch with France electing the first Socialist president in three decades and no clear majority chosen in Greece. Along with a recent dissolution of government in The Netherlands, the change in political tide is serving as a referendum on the outgoing policymakers' austerity measures in favor of pro-spending, pro-growth policies. Austerity's primary advocate, German Chancellor Merkel, has rejected government stimulus as the path to recovery, setting up a clash with French president-elect Francois Hollande's pro-growth platform. Meanwhile, with both the New Democracy and Pasok parties suffering heavy losses in Greece, a left coalition government could nationalize banks, repeal labor reforms and renegotiate the EU/IMF bailout requirements. With rumors again on the rise that Greece may exit or be forced out of the Eurozone, the common currency has become increasingly vulnerable to further depreciation. However, losses have been slow as investors struggle to find a viable alternative.

GBP - Sterling is mixed this morning, falling against the USD while gaining against the EUR. The pound slipped against the dollar after a report released overnight showed that a gauge of British house prices fell to -19 from -11 in the previous reading. However, losses have been slowed by increased demand for British government bonds as the heightened political and economic tensions on the European mainland spur investors to seek the relative safety of British assets.
JPY - The yen gained against all of its major counterparts overnight on heightened risk aversion. With Japanese officials remaining uncharacteristically quiet, despite the yen's break below 80.0 against the USD, the safe-haven JPY has posted strong gains. The biggest moves have come against higher-yielding currencies such as the ZAR, AUD and MXN.

Commodity Currencies - The high-yielding group of commodity currencies has come under increased pressure overnight with key levels of support now being tested. Raw goods are sharply lower with oil extending its recent declines to $95/bbl, gold falling to $1597 and copper tumbling 3% to $365/lb. The CAD weakened back towards parity with the USD this morning on the falling price of oil, Canada's main export. The loonie fell along with the AUD and NZD, both of which fell below key support at 1.01 and 0.79 respectively. Losses due to general risk aversion were compounded by the most recent reading of the Australian trade balance, which showed that the nations deficit more than doubled since the last reading at -1.57B AUD. With demand for Australian exports clearly lagging, investors have increased bets that the RBA will cut interest rates further in the coming months to backstop the slowing economy. However, it was the ZAR and MXN that suffered the greatest losses overnight as emerging market commodity exporters will be hardest hit by a drop in demand from Europe. As the primary destination for South African exports, any dip in European demand will weigh heavily on the ZAR. However, relatively high interest rates will continue to attract investors once the current wave of risk aversion subsides.