Morning Forex Overview

The US dollar fell against the euro and to its weakest level in a week against a basket of currencies. Demand for the greenback fell on the easing of extreme risk aversion.

On Friday, EURUSD continued its remarkable rise that started on Thursday after the publication of a better than expected euro zone PMI release. The impact of the stock market of the US data on EURUSD trading was rather limited. EURUSD closed the session at USD1.3242, compared to USD1.3144 on Thursday.

Sterling fell to a two week low against the euro and steadied against the US dollar after data showed the UK economy's fall in the first quarter was its fastest in 30 years, casting doubt on the government's economic outlook

The Japanese Yen strengthened against the USD after the news of diversification of China's FX reserves. Most of the crosses were mixed or made fresh gains as risk appetite picked up.

GBPJPY came under pressure after the Q1 GDP results. Fears of global outbreak of swine influenza, which could significantly hurt global trade, pared the Australian dollar's earlier gains in late Asian trade Monday.

The Australian dollar was USD0.7124, flat from late Friday. The currency was off its intra-session peak of USD0.7239 but up from its low of USD0.7102. Against the Japanese yen, it was JPY68.875, down from JPY69.17.

Market expectation The yen and Swiss franc - viewed as safe-haven currencies - are on the rise. Higher-yielding but riskier currencies like the Australian and New Zealand dollars are falling. Some risk aversion also came from weekend reports in the German media that the country's banking system was exposed to more than USD1 trillion of toxic or risky assets.

The market also will remain focused on economic data. The euro is well lower against the dollar and yen Monday with swine flu's potential impact curbing risk. GBP currently trades around USD1.4550. Bids said to remain around USD1.4535/30, more between USD1.4510/00 ahead of stronger level at USD1.4485/80 (USD1.4486 76.4% USD1.4397/1.4774).

A break and clear below here to open a deeper move toward USD1.4450/40. Resistance now has seen placed back at broken support at USD1.4580/85, a break above to open a move toward USD1.4620/30.

Euro remains under pressure into early Europe, the base extending to USD1.3140 at writing, and remaining under pressure. Support seen placed to USD1.3135, with stronger interest seen from around USD1.3113 through to USD1.3100. Resistance - USD1.3180, more between USD1.3200/10 ahead of USD1.3230.

Currently, market participants are closely monitoring any developments about the U.S. bank stress tests and the announcement of outcome of the meeting of the Group of Seven finance ministers in Washington as they discuss the global economic crisis.