USD - The dollar is heading into the weekend lower against all of its major counterparts as stocks and commodities stage a relief rally. The boost in confidence comes after the much-awaited nonfarm payrolls report registered far better than expected, with the economy adding 163k jobs in July. The number was better than forecasters had anticipated, and was much stronger than last month's addition of 64k jobs. Nevertheless, overall growth in the labor market continues to disappoint with the unemployment rate ticking higher to 8.3% from 8.2%. Despite the unexpected gains in the NFP report, the persistently high unemployment rate is enough to keep expectations of further Fed support alive. Elsewhere, ISM non-manufacturing - an index that measures the output of services making up nearly 90% of economy - unexpectedly improved to 52.6, versus the anticipated reading of 52.1. As such, financial markets are headed into the weekend net positive, which in turn is weighing on investor demand for the dollar's "safe-haven" status.
EUR - The euro rebounded from recent lows overnight after German policymakers signaled that they won't stand in the way of the ECB's bond purchase program. Economy Minister Roesler - whose Free Democratic Party warned the ECB to not overstep its mandate earlier this week - told reporters today that bond purchases are "within the independence and possibilities of the central bank." However, German politicians are now pushing for veto rights in the ECB. With Bundesbank President Weidmann the only ECB governing council member to vote against the immediate purchase of Italian and Spanish debt, outright veto power would only further entrench the divide amongst policymakers. Nevertheless, yields on Spanish and Italian debt are on the decline as investors still expect that the ECB will begin buying their bonds. Spanish and Italian leaders both appear cautiously optimistic and as Italian PM Monti put it, they are "maintaining a stance of 'constructive ambiguity' on European assistance."
GBP - Sterling is mixed this morning, gaining against the dollar, but falling against the EUR. UK PMI Services unexpectedly fell to a reading of 51.0 from 51.3 last month, and short of the expected gain to 51.6. In light of deteriorating economic fundamentals, investors expect that British officials will lower their forecasts for British GDP and inflation for the second half of the year. As such, the outlook for the pound remains rather negative as investors expect the BoE to ease policies further before the end of the year.
JPY - The yen is lower against most of its major counterparts as the rally in global financial markets eases some of the demand for the yen's relative safety. Today's encouraging labor data out of the US is also providing support for the resurgence in risk appetite.
Commodity Currencies - The commodity linked currencies have staged an impressive rally overnight on the revival in risk appetite. Raw good prices are rebounding with oil breaking back above $90/bbl, gold rising to $1596/oz, and copper at $335/lb. The CAD is again testing parity with the USD, supported by the stronger price of oil and the encouraging labor market report out of the US. Similarly, the AUD and NZD both reached fresh multi-month highs against the USD, supported by the rebound in risk appetite. Gains in the AUD will, however, be limited ahead of next week's RBA meeting, with possible signals of further easing. However, the MXN and ZAR have been the two biggest winners overnight as investors seek their relatively high yields. The peso also found support after the US NFP report with the majority of Mexican exports headed into the US. Meanwhile, the ZAR was supported by the positive developments in Europe, the main destination for S. African exports.