All hail the mighty greenback.

FX Update: All hail the mighty Greenback.

Today's European session was a watershed moment for the greenback. Already moving to the stronger side in Asian trading, the USD really hit its stride across the board when Fitch came out with a downgrade of Portuguese debt (from AA to AA-, a move that was presaged by a recent surge in bond yield spreads and CDS prices) that knocked equity markets and general risk sentiment for quick losses. Ahead of the NY open, EURUSD swooping to new lows no t seen since last May, and the USD index also headed to new highs since that period as almost all currencies fell against the resurgent greenback today.

The very strong IFO release today (highest number since mid-2008) couldn't do anything to reverse the Euro's slide today, as Euro weakness may actually be a driver for improved German sentiment.

Chart: USDJPY
USDJPY finally broke out of its torpor and pulled above the line of resistance created by day after day of range trading. Curiously, the bond market has come completely derailed today despite rising risk aversion in other markets today, and this is adding to the potential for this break higher in USDJPY to hold. The move has even taken the pair above the 200-day SMA which had previously held on the last two attempts at that MA in January and February. This is an important development for USDJPY as we move into the final few trading days of the Japanese financial year.

UK Budget
Just before the presentation of this report, UK Chancellor Darling is presenting the UK budget. Mr. Darling is saying that the UK government can cut the deficit in half over the next four years, but will he be given the chance as elections are just around the corner? Watch the spin on this report for further GBP implications today as EURGBP was down toying with the important support around 0.8915 before the budget announcement.

Norges Bank
Norges Bank decided not to tinker with rates once again, leaving the rate at 1.75%, which the majority were expecting, and EURNOK took off to the upside, which makes sense relative to the moves in commodity currencies elsewhere. Dovish guidance was also critical for the initial pop in EURNOK. Norges bank said that rates would rise somewhat later versus prior forecasts. It adjusted its forecast for rates in 2011 to 2.75% from 3.5% previously, for example. This could put a base in EURNOK for quite a while, especially if general risk sentiment ever takes a sustained beating.

Chart: EURCHF
Despite all of the negative EUR talk, EURCHF is trying to hammer out a low today with a resurgence from fresh lows in Asia and early Europe without any overt signs of intervention from the SNB. Is the swing lower finally weakening? Other ways to trade a weaker CHF in the short term include through a long USDCHF position, where technicals are rather interesting. Has the pressure on EURCHF reached a crescendo for now? A close at current levels or higher would creat a positive close for the first time in a long time. There wereno overt signs of intervention in today's trading.

Looking ahead
The EU summit begins tomorrow as European leaders mull how to position themselves on the crisis at the periphery as the pressue on the Euro remains white hot due to the latest Portuguese debt downgrade and on the lack of agreement from the power players in Europe (yesterday's news on both Germany and France agreeing on allowing Greece to turn to IMF notwithstanding). In some ways, Germany must be counting its lucky stars on this collapse in the Euro as it is a nice short term boost to its export competitiveness in world markets. German Chancellor Merkel has generally taken a hardline is now in conflict with the ECB over its more  stance on Greece. See this FT article for more, which indicates the ECB Is hopping mad about the IMF coming into the picture. Euro watching has become quite the spectator sport.

Of course, even as we are writing these words, the never-say-die equity market has already taken back most of the lost territory from the announcement on Greece. If the USD really wants to make a statement here, it will ignore any strength in risk today and close stronger versus the commodity currencies as well - that would be an important sign that it has really gained the upper hand among the G-10 currencies. But seeing is believing...

Economic Data Highlights

• US Weekly ABC Consumer Confidence fell to -44 from -43 last week
• New Zealand Q4 Current Account Balance out at -3.574B vs. -1.600B expected, and -1.586B in Q3
• Japan Feb. Adjusted Merchandise Trade Balance out at ¥470.5B vs. ¥389.2B expected and ¥651.1B in Jan.
• Sweden Mar. Consumer Confidence out at 15.5 vs. 13.2 expected and 13.0 in Feb.
• Germany Mar. Preliminary PMI Manufacturing out at 59.6 vs. 56.8 expected and 57.2 in Feb.
• Germany Mar. Preliminary PMI Services out at 54.7 vs. 52.2 expected and 51.9 in Feb.
• Germany Mar. IFO out at 98.1 vs. 95.8 expected and 95.2 in Feb.
• EuroZone Mar. Preliminary PMI Manufacturing out at 56.3 vs. 54.0 expected and 54.2 in Feb.
• EuroZone Mar. Preliminary PMI Services out at 53.7 vs. 52.0 expected and 51.8 in Feb.
• US Feb. Durable Goods Orders out at +0.5% MoM and +0.9% MoM ex Transportation vs. +0.6/+0.6% expected, respectively
• Norway Norges Bank leaves rates unchanged at 1.75% as majority of analysts expected

Upcoming Economic Calendar Highlights

• US Feb. New Home Sales (1400)
• US Weekly Crude Oil and Product Inventories (1430)
• US Fed's Hoenig to Speak (1445)
• Switzerland SNB's Jordan to Speak (1600)
• New Zealand Q4 GDP (2145)
• Australia RBA's Lowe to Speak at conference (2340)
• Japan Feb. Corporate Service Prices (2350)
• Japan BoJ's Kamezaki to Speak (0130)