USD - The dollar is lower against most of its major counterparts this morning as global investor confidence continues to improve despite the lack of good news. Stocks and commodities are mixed, with the DJIA reversing early losses while energy prices push higher with Hurricane Isaac hampering oil production along the Gulf. On the data front, consumer confidence data released this morning tumbled by the most since October, dropping to 60.6 from 65.4 in the previous reading. Today's disappointing number comes as a surprise as modest improvement in the labor market and lower inflation were expected to push the gauge higher to a reading of 66.0. On a brighter note, a separate report showed that home prices in the 20 largest metropolitan areas rose in the 12-months ended in June - the first year over year gain in nearly two years. Richmond Fed data also came in slightly better than expected at -9 versus -17 in the previous reading and better than the -10 that was anticipated. The dollar will thus likely remain relegated to its recent ranges in the days ahead as investors continue to weigh the prospects of a third round of quantitative easing. While QE3 would likely not have the same impact on the economy that the first two programs had, continually weak economic data may prompt the central bank into action.
EUR - The euro is retesting its recent highs this morning as investors suspect that European officials are taking steps to backstop the region's economies. ECB President Draghi was scheduled to attend this weekend's global central bank summit in Jackson Hole, WY, with a key address due on Saturday afternoon. However, the plans have been canceled, with the ECB chief unable to get away from his busy schedule. With the Bank set to hold its monthly policy meeting next week, investors are hopeful that Draghi's snub is a sign of a forthcoming policy announcement. In anticipation, sovereign debt yields are on their way down across the region. An auction of three- and six-month Spanish bills was oversubscribed, driving the yield on the three-month bill down to 0.946% from 2.434% in the previous sale of the securities. However, with only short-dated bonds expected to fall under the purview of the ECB's proposed bond-buying scheme, the yield on longer-dated bonds remain high. Domestically, Spanish policymakers are struggling to slash government spending while also fostering economic growth. This morning, the Spanish state of Catalonia tapped a federal aid program, requesting €5B - nearly a third of the €18B Spanish "rescue" fund created back in July.
GBP - Sterling is mixed this morning, gaining against the USD while falling versus the EUR. The pound is lower against its mainland European counterpart for the first time in three days as disappointing economic data spurs expectations of further BoE stimulus. British home prices fell 0.1% in July, likely pushing the economy even deeper into recession. Consequently, investors have increased bets that the central bank will add to its asset purchase program, possibly as soon as their meeting next week.
JPY - The yen continues to strengthen even after Japanese policymakers cut their outlook for the economy. The recent improvement in risk sentiment has sent JGBs into their biggest monthly slide in more than a year, which in turn is providing support for the yen as the yield gap between USD and JPY denominated assets remains historically narrow.
Commodity Currencies - The commodity linked currencies are mostly higher this morning with only the NZD posting a loss. Raw goods are mixed with oil gaining to $96/bbl while gold and copper fell to $1665/oz and $347/lb respectively. The CAD neared its best levels vs. the USD since the end of April as the rising price of oil, Canada's primary export, provides support. With Hurricane Isaac set to disrupt energy output in the Gulf, the CAD may be in for further gains as the price of crude nears $100/bbl. The MXN rebounded from early losses after the improved US housing market data is expected to provide support for peso remittances from migrant laborers. Meanwhile, the NZD is lower after New Zealand dairy giant Fonterra Cooperative Group cut its earnings outlook due to persistent NZD strength and reduced foreign demand.