Evidence is increasing that the worst of the global recession is passed. Business activity in the U.S., the world's biggest economy, rose more than economists forecast in August, the Institute for Supply Management-Chicago Inc. said Monday. The Chicago PMI report is further indication that the U.S. economy is starting to improve; the data eased risk aversion among investors analysts said, with positive data negative for the Dollar and Yen.

The USD fell against a basket of currencies due to the decline in U.S. equities, as fears that the recent rally has overheated. This decline was led by the 7% fall in China's stock market index. As a result, the Dollar was hurt as traders fled to currencies such as the GBP and EUR. The greenback fell by about 50 pips to the 1.4336 level vs. the European currency. Against the British Pound, the Dollar slid by over 50 pips to 1.6283. The USD did make some gains, as the USD/JPY cross rose by 30 pips to the 92.95 level. Note, this is the first time in 3 days that the USD closed higher against the JPY.

Looking ahead to today, there is some pivotal news that is set to be released from the U.S. economy. The ISM Manufacturing PMI and Pending Homes Sales figures are set to be published simultaneously at 14:00 GMT. These results are even more important than usual due to the recent turmoil in equity markets and commodity markets, therefore all eyes are on the Dollar as the U.S. economic situation is set to improve further. It is advised that traders open their USD positions now, as this trading day is set to become very volatile in the coming hours. Furthermore, today's results are set to drive the forex market for the rest of this week.