Key Developments

The dollar is a mixed.  It is firmer against the major European currencies and many of the more actively traded emerging market currencies, but lower against the dollar-bloc and little changed against the yen.

The two most important developments have been the apparent stabilization of the situation in Japan and Moody's two-step cut in Portugal'd debt rating to A3 and maintaining a negative outlook.  This comes, of course, on the heels of the last week's extra 0.8% of GDP spending cuts and the weekend European summit that was trumpted as a big step toward closure of the debt crisis.    Moody's cut Greece and Spain's rating last week.  It should not be surprising if Moody's follows up and cuts the ratings of several Portuguese banks. 

EFSF's head Regling was quoted saying that the question of Greece's need for restructuring of its debt is an open question, which is a significant change from the usual denial.  It is not clear whether this is a one-off lapse or a signal, but it is clearly worth monitoring. 

The euro has again been turned back from the $1.40 area.  Third time in three sessions.  The $1.3900-20 band offers the next support and then $1.3850, which held yesterday.  European stocks opened higher and could not sustain early gains

The UK reported better than expected employment data, but a jump in earnings (reported with a month lag to the employment data).  Sterling got a  bit of a boucne, but this too has not been sustianed.  Initial support is near $1.6050, while the sub-$1.60 move yesterday was bought.   More inclined to see the dollar rise against the yen with stops below JPY80.50.