USD - The dollar pushed sharply higher overnight on renewed concerns that the European debt crisis is worsening. As such, equities and commodities are lower this morning, spurring demand for the dollar's relative safety with no major economic data out of the US to persuade investors otherwise. Meanwhile, the 10-Yr US treasury yield fell to a fresh all-time low this morning as investors flocked to safe-haven assets. While the US economy continues to generally outperform the majority of its peers, the pace of growth remains frustratingly slow with continued weakness seen in the manufacturing sector and labor market. Yesterday's unexpectedly weak reading of consumer confidence, which fell to 64.9 from 68.7 in the previous reading, and an unanticipated contraction in Dallas-area Manufacturing highlighted these concerns. Pending home sales slipped by more than expected this morning, registering -5.5% versus the 3.8% expansion posted last month. Investors appear squarely focused on this Friday's labor market reports, with a below-forecast reading likely stoking expectations of further Fed policy easing. However, with US interest rates already near record lows across the yield curve, further quantitative easing likely won't be as potent as the Fed's first two rounds of liquidity injections.

EUR - The EUR tumbled to a 23-month low against the USD while declining against all of its other major counterparts. While Greece's lack of government and forthcoming contentious elections remain a cause for concern, the growing struggles of Spanish banks are stealing the spotlight this week. The ECB rejected Spain's partial nationalization plan of Spanish financial institution Bankia in which the bank would swap government paper issued by the federal Spanish government for liquidity from the ECB. However, with Spanish yields again on the rise - the yield on the 10-Yr is currently over 6.5% - the ECB will likely have to step in to stabilize yields through the ESM. Similarly, Italian yields are on the rise with the rate on a 10-yr breaching the key 6% barrier for the first time since late January after an Italian auction was undersubscribed. In contrast, the flight to safety has driven yields in the region's strongest economy, Germany, to an all-time low with the yield on a 2-Yr bund dropping to 0.002% this morning. Meanwhile, the Irish are set to vote on a referendum on the EU's fiscal compact this Thursday. The latest polls suggest that Irish voters will approve more stringent budget rules and increasing fiscal ties amongst the EU nations, but the potential for a last minute surprise has kept investors on edge. While a no vote in Ireland would not necessarily prevent the treaty from moving forward, it may set off a wave of similar referendums across the EU, further undermining confidence in the common currency.

GBP - Sterling fell to a four month low against the dollar while gaining against the EUR. The pound continues to derive support from increased safe-haven demand for British government assets, but it has pushed back to the bottom of its annual ranges as investors fear the slowdown in mainland Europe will weigh on British economic growth. As such, investors are focused on next week's BoJ meeting at which policymakers are increasingly expected to bolster their asset purchase program.
JPY - The yen strengthened back towards its best levels since mid-February as investors seek its relative safety. However, it's clear that Japanese officials are growing increasingly uncomfortable with the yen's rapid gains. Vice Finance Minister Nakao told reporters this morning that disorderly and speculative movement of the currency is not constructive for economic growth. While further strengthening could prompt another round of central bank intervention, any resulting weakness would likely only be temporary with the ongoing Eurozone crisis driving risk aversion.

Commodity Currencies - The commodity linked currencies came under pressure overnight as investors exited riskier positions en masse. Raw goods fell early with oil dropping to $87/bbl, copper falling to $338/lb and consumables generally in the red. The CAD slipped by more than half of a percent against the USD, pressured by the falling price of oil - Canada's primary export. Similarly, the MXN broke back above the key psychological 14.0 handle against the USD. Meanwhile, the AUD fell against all 16 of its major counterparts after Australian retail sales unexpectedly fell, prompting investors to price in further interest rate cuts from the RBA.