Dollar Firmer Against Euro, Yen

NEW YORK ( BBH FX Strategy) -- The dollar is mixed against most major currencies, rising against the yen and the euro while falling against the Antipodeans currencies. With the exception of the yen, moves in foreign exchange market remain constrained to familiar ranges as investors seem to lack near-term conviction.

The euro was little changed following the ZEW survey, which was on balance positive with the expectations component coming in at 22.3, above its 10-year MA for the first time since July 2010. The euro is trying to recover from the breakdown at the end of last week but needs to resurface above the $1.3210 area to blunt some of the negative bias.

Eurozone spreads are mixed, with Spain the notable under-performer and the two-year yield up 10 basis points. Global stocks are mostly higher with the EuroStoxx 600 up 1.0% led by the nearly 2% rise in banking shares, while Asian shares and U.S. index futures also rose.

Spain remains in the spotlight. The European Union has asked Spain to make deeper budget cuts, calling on the nation to cut an additional 0.5 percentage points of GDP from the 2012 budget. This means that Spain would still be running a deficit equal to -5.3% of GDP, almost a full percentage point more than what was originally agreed to with the EU.

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Indications from the Finance Ministry suggest this is acceptable to Spain and some additional savings will be delivered, but as the recession deepens, this issue will remain a sore point.