USD - The dollar is headed into the long weekend near the top of its recent ranges against the majority of its peers. Risk aversion has continued to support the USD in its role as safe-haven asset with the ongoing fears that the Eurozone remains on shaky ground. Meanwhile, the outlook for the US economy continues to improve with consumer confidence far surpassing expectations. U. of Michigan confidence came in at 79.3 versus the 77.8 reading that was expected. The push higher marks the best reading since September 2007, before the financial crisis sent the US economy into a downward spiral. A healing labor market, improved conditions in the housing sector and falling gas prices are easing the stress on American households even as the global economy appears to be softening. The dollar will likely remain supported towards the top of its recent ranges, but with the shortened trading day leaving currencies susceptible to volatile trading conditions.

EUR - The EUR resumed its declines this morning after pushing back to the top of its recent ranges overnight on renewed concerns over Spain. The Catalan region, one of Spain's largest states in both size and population, has apparently requested funding assistance from the Spanish federal government. While it's not new news that Spain's economy is struggling, blatant signs of stress are adding to concerns that the Eurozone's fourth largest economy could be in need of external EU/ECB/IMF support. Meanwhile, it appears that Eurozone leaders may be building a consensus on further steps to backstop the region's fledgling economies. German Chancellor Merkel has left the door open to further compromises on shared debt issuance amongst the Eurozone nations. At an informal summit earlier this week, Merkel vehemently opposed the idea of Eurobonds, but it appears her position may be softening as she comes under fire from not only her regional counterparts, but also the opposition parties within Germany. Italian Prime Minister Mario Monti told reporters that he could bring Germany around to acting in Europe's common good. However, as European leaders grapple with divergent views on fiscal union ahead of a summit scheduled for June 27th, a Greek departure from the Eurozone remains a very real threat with another election slated for the 17th. While the 1.25 level will provide stiff support for the common currency in the near term, further weakness can be expected in the months ahead.

GBP - Sterling remains towards the bottom of its recent ranges against the USD while strengthening against the EUR. While demand for the relative safety of British government assets is keeping the pound relative well supported in light of the turmoil in mainland Europe, the pounds gains remain limited by growing expectations that the BoE will pursue further QE. With British GDP contracting by more than expected in Q1, with a 0.3% decline, the market has begun to price an increase in asset purchases in the coming months.

JPY - The yen consolidated within its recent ranges overnight, gaining support as global equities look to end the week in the red. Meanwhile, Japanese inflation came in slightly higher than expected, with core CPI rising to 0.2%. While still far from the BoJ's 1% target rate, with deflationary pressure easing, the Bank may have room to increase its stimulus measures in the second half of the year.

Commodity Currencies - Commodity currencies are mixed this morning with both the CAD and MXN falling while the AUD and NZD inch higher. Raw goods are generally higher with oil gaining to $91/bbl, gold rising to $1565/oz and copper rebounding further to $345/lb. The CAD fell to a fresh 4-month low this morning as concerns over Europe weigh on demand for riskier assets. Similarly, the MXN remains near the bottom of its recent ranges, but reports are that the Mexican central bank continues to defend the key 14.0 handle through the sale of USD. The AUD extended its recent declines for a fourth straight week on concerns that slowing global growth will weigh on the Australian economy.