USD - The dollar consolidated in its new stronger ranges against most of its major counterparts while continuing to weaken against the safe-haven JPY. Losses in stocks and commodities accelerated in early trading as economic data fell short of expectations. Perhaps most notably, Q1 GDP slowed to 1.9% from 2.2% in the previous reading, reflecting a slower buildup of inventories and a sharp decrease in government spending. Nevertheless, household consumption and automobile purchases kept the economy growing in the first three months of the year as the labor market showed signs of improvement. However, it appears that the strong quarter of jobs growth may be offset by a quickly deteriorating outlook for jobs in the second quarter. Payrolls provider ADP released a report this morning showing that private sector jobs grew by 133K this month, which is better than the 113K posted last month, but short of the forecast 150K. Meanwhile, weekly jobless claims ticked higher to 383K from the 373K last week. Chicago PMI also missed the mark at 52.7 versus 56.2 as was expected, underscoring the slowdown in the manufacturing sector. The weak data, and resulting selloff in stocks, commodities and other risk assets is generally supportive of the USD in its role as a safe-haven asset, but its upside potential remains limited by increased expectations of another round of stimulus from the Fed. With the ongoing crisis in Europe and an apparent slowdown in economic growth in most of the world's major economies, the central bank may be prodded into action sooner rather than later, leaving the dollar vulnerable for a pullback.

EUR - The euro consolidated towards the bottom of its recent ranges even as both Spanish and Italian bonds rallied. Demand for the Spanish 10-yr government bond rose, driving yields down from yesterday's intraday high over 6.7%, on speculation that the ECB will soon announce further monetary policy action. The Bank meets next week and investors have begun to suspect that policymakers could announce another LTRO, signal that they will directly purchase bonds in struggling member nations, or even cut the Bank's benchmark interest rate from the current 1%. After Spain's plan to ease faltering Spanish bank, Bankia's, access to capital was rejected by the ECB, investors have fled Spanish assets in a crisis of confidence. The plan has essentially served as a signal to the market that Spain will not be able to backstop its banking sector without external support, and the ECB has made it clear that it doesn't plan to assist. Meanwhile, Greece remains a cause for concern with a possible exit from the Eurozone still a very real prospect. While still mixed, recent polls show the anti-austerity Syrzia party running neck and neck with the pro-bailout New Democratic Party. As such, the downside risks for the common currency will likely prevail in the longer term. However, the EUR's declines have remained relatively orderly with regional safe-haven flows largely headed into Germany government bunds. The region's largest economy continues to perform relatively well as a strong retail sales report showed yesterday (+0.6% versus expectations of +0.2%).

GBP - Sterling is lower this morning against both the USD and EUR on increased expectations the BoE will announce further stimulus measures at its meeting next week. Demand for the sterling has also weakened as of late as safe-haven capital flows are largely targeting the USD, JPY and regionally, German bunds rather than the GBP.

JPY - The yen reached a fresh three-month best against the USD overnight as the continued sell-off in global equities prompted a renewed wave of risk aversion. However, with the yen breaking below yet another level of support against the USD at 79.00, Japanese policymakers have increased their interventionist rhetoric. Finance Minister Azumi told reporters this morning that the recent appreciation was a bit speculative, adding that he continues to watch for excessive yen moves.

Commodity Currencies - The commodity linked currencies continued to fall overnight as raw goods pushed deeper into the red. Oil is down to $86/bbl, gold is at $1558/oz, and copper has tumbled to $335/lb. The CAD fell by more than half of a percent against the USD on signs that the US economy, the main consumer of Canadian exports, is slowing. Similarly, the MXN extended its recent steep declines, falling to the lowest levels against the USD in more than six months. The AUD and NZD both fell to fresh 2012 lows overnight, but their declines remain relatively orderly as Australian and New Zealand government assets draw an increased amount of safe-haven demand.