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Buck Peaks; Euro Tumbles Overnight

The U.S. currency emerged relatively steady against the euro and its other main rivals on Monday, following volatile market movements since late last week.

The U.S. dollar opened steadier against the euro on Monday after touching a new four-year peak overnight. The single currency staged a cautious rebound after sharp declines in recent sessions.

Stronger-than-expected German industrial orders in April also added to the euro's more stable tone. Still, the euro's outlook remains bearish, given worries that the bloc's sovereign debt crisis might be worsening after recent reports that Hungary's public finances were in a similarly precarious position much like Greece. Hungarian officials have since denied the reports.

Overall market sentiment remained skewed to the downside after Friday's monthly U.S. jobs report for May came in below forecasts and suggested the recovery might be losing momentum.

Dow

industrials fell to four-month lows on Friday, with Asian shares also plunging more than 3% on Monday. Consequently, safe-haven destinations, such as the U.S. and Japanese currencies, have benefited from the broad retreat from riskier assets. Underscoring the buck's broadly buoyant tone, it rose to a 15-month high against a basket of six major currencies on Monday.

The Canadian dollar started Monday near a 1-1/2-week low against the U.S. dollar, hurt by the slide in market confidence that weighed on stock and commodity markets. Oil prices opened the week above $71 a barrel, a loss of about 0.5%.

EUR

: The euro tumbled to a new four-year low against the U.S. dollar overnight, though it stabilized to begin the North American trading session mostly flat compared to Friday's close. Industrial orders from the euro zone's largest economy, Germany, rose more than expected in April, which helped to ease pressure on the single currency. German industrial orders rose by 2.8% (m/m) in April, which was above the 0.2% (m/m) increase investors had expected.

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Nevertheless, the euro's upside is expected to be limited for the foreseeable future, particularly after worries about the precarious state of Hungary's finances stoked fears that Europe's sovereign debt crisis might be worsening. Hungary is a member of the European Union, though it is not a part of the euro zone.

GBP

: The U.K. pound fell to a 1-1/2-week low against the U.S. dollar overnight, dragged down by the rise in risk aversion. Looming public spending cuts in Britain also continued to weigh on the pound as investors fear that they could crimp consumer spending and dampen the outlook for U.K. economic growth.

CAD

: The Canadian dollar slipped to a 1-1/2-week low against the U.S. dollar during the overnight session. Like many growth-sensitive and commodity-based currencies. The loonie has been hurt by the sharp pullback in risk appetite as evidenced by tumbling stocks and oil prices. A relatively quiet week ahead for Canadian data will see investors look to reports on housing starts on Tuesday, the trade balance on Thursday, followed by capacity utilization on Friday.

USD

: The U.S. currency emerged relatively steady against the euro and its other main rivals on Monday, following volatile market movements since late last week. The buck's upbeat tone is more a product of its status as a safe-haven currency, which has helped to eclipse concerns about the strength of the U.S. recovery following disappointing domestic jobs figures on Friday.

Although the U.S. economy added the most jobs in a decade in May, the bulk of the sharp increase was tied directly to government hiring for temporary census workers. Of the 431,000 U.S. jobs that were created in May, only 10% of them were by private employers, who are considered the backbone of the U.S. economy.

In order for the U.S. recovery to be a sustainable one, investors will want to see concrete signs of stabilization in the labor market. Friday's U.S. jobs report could set the tone for investors in the coming sessions, underscoring how influential the data set is.