USD - The dollar is evenly mixed this morning against its major counterparts as the continued stream of positive economic data out of the US offsets some of the ongoing European fears. Housing starts came in better than expected as builders broke ground on 717K new homes, erasing the previous month's shortfall. Industrial production also surprised to the upside, coming in at +1.1% versus the expected gain of +0.6% and after last month's downwardly revised -0.6%. Rising output at factories, mines and utilities led the push higher despite the drop in demand from overseas consumers. With the outlook for the US economy improving, the USD is benefitting as investors pare bets that the Fed will pursue further rounds of quantitative easing, at least in the near term. However, it won't necessarily be smooth sailing ahead for the economy as the US faces its own bout of political tensions with the debt debate that almost saw the government shut down one year ago comes back into focus. Republican leaders are demanding further budget cuts in order to approve yet another hike in the debt ceiling, but Democrats and federal economists alike insist that the resulting fiscal drag will snuff out any economic recovery and likely push the economy back into recession. The same debate ended in a downgrade of the US credit rating last year, and while the loss of the coveted AAA rating doesn't carry the same weight that it did just twelve months ago, it's clear that policymakers must right the ship before further damage is done.

EUR - The euro consolidated within its recent ranges overnight as Greece prepares to hold new elections. With leftist and anti-bailout parties gaining increased support in recent polls, the common currency has come under increased pressure with many investors now beginning to price in a possible Greek exit from the Eurozone if not the EU all together. Fears have been compounded overnight amid reports that Greeks are pulling cash out of the nation's banks in anticipation of a EUR exit and immediate devaluation of any replacement currency. With Greek's also heading back to the voting booths, it appears that the nation's two EU/IMF/ECB bailout packages may be in jeopardy. Fresh concerns have arisen after the ECB reported that it has halted lending to some Greek banks, further weighing on risk appetite. Elsewhere in the Eurozone, Spanish and Italian debt yields continue to rise, sparking fears that the Greek contagion may prompt either nation to seek financial assistance in the months ahead. However, in spite of all the negatives against it, the common currency remains relatively well supported. As former ECB President Trichet put it, the current woes are a debt crisis and not a currency crisis. However, with eight Eurozone nations now in recession, and with debt yields again on the rise, the semantic differentiation between the types of crisis may not last much longer.

GBP - Sterling is lower against both the USD and EUR this morning after British policymakers yet again cut their forecast for economic growth. The downgrade comes after the BoE proved to be relatively hawkish at their last meeting, with an apparent switch in focus to hone in on bringing inflation back within the Bank's target range. However, with the ongoing crisis in the Eurozone and the protracted pace of growth elsewhere in the world, it's clear that British policymakers have not ruled out further QE just yet. Nevertheless, the GBP's downside may be limited as investors flock to the relative safety of British government assets in light of the current risk-off atmosphere.

JPY - The yen remained towards the lower end of its recent ranges despite its safe-haven appeal. Investors will take note of Japanese GDP data due later this evening with an expected Q1 reading of +3.5%, a sharp improvement from the -0.7% recorded in Q4 '11. However, Japanese officials are already downplaying the strong reading, and urging investors to expect weaker growth going forward as the recovery from last year's natural disasters loses pace.
Commodity Currencies - The commodity-linked currencies extended their recent declines this morning as markets remain generally risk averse. Raw good prices are under pressure with oil dropping to $93/bbl, gold falling to $1540/oz and copper slipping to $347/lb. The CAD reversed an overnight rebound this morning on the falling price of oil, Canada's main export, and as the ECB report sapped demand for riskier assets. Similarly, the AUD and NZD are both under pressure this morning after disappointing investor data out of China. A report showed that foreign direct investment into the mainland slowed for the sixth-straight year and outflows increased by a shocking 72.8%. As the main destination for Australian exports, the long-term outlook for the AUD is closely tied to the pace of Chinese economic growth. While the world's second largest economy may not be headed for a hard landing per say, a period of rather pedestrian GDP expansion will likely weigh on the AUD and Australian economy as a whole.