Last week was packed full of obstacles for the risk trade yet none managed to significantly undo its momentum.  The result has been that the USD has been dumped this morning in favour of the EUR, the AUD, NZD, CAD and the pound.  Aided by USD weakness oil prices are pushing higher and gold has seen new highs just shy of USD1110.00 /troy ounce.

The surprisingly high 10.2% print in Friday US unemployment rate did threaten to lure flows back towards the safe haven of the USD.  However, the payrolls report brought decent revisions suggesting that the pace of job losses in the US is stabilising.  Also many investors chose to interpret  the higher jobless rate as meaning that US economic stimulus would remain on the table for longer; this factor allowed stocks to close out the week on a better note.  The reassurances from the weekend G-20 meeting that 14 of the 16 major counterparts agreed to keep stimulus measures in place and the absence of any mention over the relative weakness of the USD has further fuelled the risk trade. 

There was no mention of USD weakness in the G-20's official communique.   The notes that were prepared by the IMF for the weekend meetings, however, do have relevance for fx markets.  The IMF noted that the USD was being used as a funding currency.  It also appears to direct its attention towards Asia, in particular China, by suggesting that ''allowing a rapid appreciation of the real exchange rate would help limit capital inflows by reducing ''one-way'' bets, and also facilitate a rebalancing of demand''.  China's USD peg is exaggerating the degree to which the JPY and the EUR are bearing the brunt of the USD's downward adjustment and this is likely to be a political topic for the coming year.  Japan's Finance Minister Fujii   this morning commented that the US believes a strong USD is desirable.  USD/JPY has been steady close to Friday's close this morning. 

The AUD, NZD and the CAD have all been strong performers this morning.  Australian home loans rose the most in 6 mth.  NZ house prices rose for the 1st in 16 month, but the NZD received an additional boost from the news that Fonterra (NZ's biggest single trader of milk) would increase its price for milk products by 20%.  Press reports suggest this would inject an additional NZD 1.2 b ln into the domestic economy. 

There has been no UK data this morning but cable has soared vs the weaker USD though EUR/GBP remains confined above the 0.8900 technical support. 

In addition to the weak USD, oil has found additional support from fear over the impact of Hurricane Ida in the Gulf of Mexico. 

This afternoon, Canadian housing starts are due.