The U.S. Dollar gained considerable ground against all of the major currencies last week amid increasing uncertainty among investors over the Irish, Spanish and Portuguese financial situations in the European Union. The increased risk aversion was further exacerbated by increased aggression from North Korea against South Korea, which strengthened the Greenback considerably against all of the major currencies last week.

The Greenback's gains last week were especially impressive against the European currencies, with the Euro shedding -3.3 percent and the Pound Sterling losing -2.5 percent respectively. On the other hand, the Japanese Yen, which had been under pressure for the previous two weeks, lost only -0.8 percent last week against the Greenback.

The commodity dollars were also hit hard despite higher commodity prices, due in large part to the lack of investor risk appetite in the markets. The Canadian Dollar was the best performer among the commodity currencies, losing only -0.2 percent against the Greenback, while the Australian Dollar declined by -2.2 percent and the New Zealand Dollar - the hardest hit among the commodity currencies - dropped an impressive -3.6 percent.

Economic releases in the United States were fairly sparse last week due to the Thanksgiving Day bank holiday celebrated on Thursday and the results were largely mixed to negative. The U.S. releases had a few bright spots including U.S. Preliminary GDP, which rose to +2.5 percent last quarter compared to the +2.0 percent rise seen for the previous quarter and the market consensus call for a +2.3 percent gain.

U.S. stocks were mixed to mostly lower last week, with the Dow Jones Industrial Average dropping -111.55 points or -1.0 percent to 11,092.00, while the S&P 500 declined by -5.12 points or -0.28 percent to 1,802.42. With respect to the broader based indexes, the Nasdaq composite gained +16.44 points or +0.65 percent to close at 2,534.56, while the Russell 1,000 dropped by -4.46 points or -0.67 percent to close at 659.31.

Commodities were higher for the most part last week, with the exception of Industrial Metals which all declined except for Nickel and Lead. The price of gold increased last week - rising in part on safe haven buying due to the tense situation between North and South Korea - to close at $1,363.53 per ounce, or +0.8 percent on Friday. Crude oil also gained ground last week, closing at $83.76 per barrel, up +$2.25 per barrel or +2.76 percent. The grain markets were also mostly higher, with Corn gaining +3.88 percent and Soybeans rising +4.99 percent, although Wheat closed unchanged on the week at $6.60 per bushel.

Yields on U.S. Treasuries were mixed again last week, with the 30 year Treasury bond dropping by 3 bps to yield 3.88 percent. Near term yields, as well as yields on shorter term Treasury bonds were also mixed last week, with the 3 month T-bill yielding 0.16 percent versus 0.14 percent the previous week, while the 10 year T-bond yield declined to 2.87 percent from 2.88 percent.

The U.S. Dollar Index rose by +1.85 last week from 78.50 to 80.36, breaking the key psychological 80 level in the process and bringing the index to a gain of +2.50 points or +3.21 percent for the year to date.

Last Week's U.S. Data Review

The U.S. Dollar benefitted considerably last week from investor risk aversion resulting from the Irish financial crisis, as well as from safe haven buying due to increased geopolitical tensions among North and South Korea. Nevertheless, U.S. economic numbers were mixed last week with Durable Goods Orders a particular disappointment, and the FOMC Minutes revealed more pessimistic thinking on the part of U.S. monetary policymakers with respect to the already dreary U.S. growth and employment picture.

Monday's trading session saw the U.S. Dollar benefit overall from growing risk aversion after Moody's Investor Services warned the market that it might have to make a multiple notch downgrade for Irish debt. The rating agency noted that the rescue package from the EU and the IMF would, "crystallize more bank-contingent liabilities on the government balance sheet, and increase the Irish sovereign's debt burden." Over the previous weekend, the Irish government had agreed to the joint EU/IMF bailout program, which is currently estimated to be between 80 and 100 Billion Euros.

The Greenback also generally strengthened on Tuesday due to safe haven buying after reports of artillery fire between North and South Korea emerged. In terms of U.S. data releases out last Tuesday, Preliminary U.S. GDP was a pleasant surprise, coming out at +2.5% for the quarter, compared with an anticipated +2.3%, although Existing Home Sales fell to 4.43M from 4.5M that was lower than the consensus call of 4.51M. Also out on Tuesday was the FOMC's Meeting Minutes for their November 2^nd and 3^rd meeting. The minutes showed that the FOMC had approved the new QE II by a near unanimous vote of 10-1 and had also downgraded its estimate for future unemployment, which is now projected to fall within the 8.9% to 9.1% range for 2011. In addition, U.S. inflation was forecast to rise somewhat but still stay below 2%. The committee also downwardly revised its growth estimate that now has U.S. GDP projected to grow by 2.4% to 2.5% for 2010, 3.0% to 3.6% for 2011, 3.6% to 4.5% for 2012 and 3.5% to 4.6% for 2013.

The Dollar gave back some of its gains on Wednesday after U.S. Core Durable Goods Orders fell by -2.7% for the month that was significantly lower than the anticipated rise of +0.7% anticipated, although the previous number was revised significantly higher from -0.8% to +1.3% which neutralized the dollar-negative impact somewhat. U.S. Durable Goods also fell by a large -3.3% compared with an anticipated rise of +0.2%, but the previous number was revised upward from +3.3% to +5.0%. Also out last Wednesday was the University of Michigan's Consumer Sentiment Indicator which printed at 71.6 compared with an anticipated 69.5, and Initial Jobless Claims improved to 407K compared with an anticipated 434K. Nevertheless, U.S. New Home Sales came out at 283K that was considerably lower than the 311K anticipated.

On Thursday, the Dollar primarily consolidated as U.S. markets were closed in observation of the Thanksgiving Day Bank Holiday.

The Greenback then resumed its rise on Friday as the market speculated on whether Spain and Portugal might be the next countries in line for a bailout from the IMF and the EU. The Dollar also benefitted from fresh safe haven buying as geopolitical tensions increased among North and South Korea.

Fundamental Data Outlook for the United States

The economic data week coming up in the United States is somewhat more active than last week, and the economic calendar will feature important U.S. employment data like the key Non Farm Payrolls number that is scheduled for release on Friday.

Monday will begin the quite active week with the tentatively scheduled release of the important U.S. Treasury Currency Report.

Tuesday will then offer the S&P/CS Composite-20 HPI (+1.2% y/y), the Chicago PMI (60.1), the CB Consumer Confidence survey (52.8), and Federal Reserve Chairman Ben Bernanke will give a speech in Columbus.

Wednesday's calendar looks particularly busy with Challenger Job Cuts (-31.8% y/y), the important ADP Non-Farm Employment Change (70K), Revised Nonfarm Productivity (+2.4% q/q), Revised Unit Labor Costs (-0.2% q/q), ISM Manufacturing PMI (56.3), Construction Spending (-0.3% m/m), ISM Manufacturing Prices (70.9), Crude Oil Inventories (last 1.0M), Total Vehicle Sales (12.1M), and the important Fed Beige Book all scheduled for release. FOMC Member Yellen will also give a speech in New York on Wednesday.

On Thursday, traders will be watching for Initial Jobless Claims (425K), Pending Home Sales (-0.9% m/m) and Natural Gas Storage (last -6B) to be released. Also on Thursday, FOMC Member Bullard will give a speech in Washington D.C., and FOMC Member Duke will give a speech in Philadelphia.

Friday will conclude the notably busy week with the scheduled release of the highlighted Non-Farm Payrolls data (+143K), in addition to the U.S. Unemployment Rate (9.6%), Average Hourly Earnings (+0.2% m/m), ISM Non-Manufacturing PMI (54.7) and Factory Orders (-0.7% m/m).