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USD - America's currency ended this past week in a precarious position: After four consecutive days of selling-pressure-the dollar's worst trend since the end of May-the greenback once again found itself within striking distance of its yearly lows. The trickling of sanguine economic data over the past few weeks, culminating with last Friday's robust US housing data (Existing Home Sales +7.2% in Jul. (5.24M)-the highest since Aug. 2007) helped bolster economic sentiment, increase risk appetite, which in turn provide traders ample excuse to jettison the world's reserve currency. Moreover, cautiously optimistic comments by Fed Chief Bernanke during last week's gathering of global central bankers at Jackson Hole, WY, that the world is beginning to emerge from a deep global recession, further exacerbated the risk trend. Notwithstanding the triple combination of low interest rates, cheaper home prices, and the US government's $8K tax credit for new homebuyers, the ominous factor that threatens to impede growth in the housing sector remains a persistently unstable unemployment situation in the US. Markets will have plenty to digest throughout this week with a battery of key economic indicator releases on the docket: US Consumer Confidence Index, Durable Goods Orders Index, and revisions to the Q2'09 GDP reading, not to mention additional housing data and the weekly Initial Jobless Claims reports. Barring any significant downside surprises, nascent signs of economic stabilization (arguably recovery/growth) will likely continue to fuel the greenback's slide into the foreseeable future.

EUR - The euro is gaining on improving prospects for the Eurozone. The single currency climbed to a high of $1.4375 last week and remains above $1.43 to start this week as positive economic data raised optimism that the region was finally emerging from its deep recession. The E-16 PMI rose to 50.0 in August, boosted by strong performances by Germany and France. Germany, Europe's largest economy, also reported its ZEW economic sentiment index at an above forecast 56.1 in August in a further sign that the economy is rebounding. Positive news from the Region continues into today with Eurozone industrial new orders rising 3.1% in June from a negative reading previously. The euro is likely to remain supported this week as positive signs of economic growth in the E-16 provide a base of support for the currency. GBP The current GDP release shows that amongst the G7 the UK has been the clear underperformer in Q2 with GDP down 3.1% q/q annualized. One reason for the underperformance relative to, for example, Germany and France is a later start of the cash-for-clunkers scheme to boost car sales. The minutes of the BoE revealed that three of the members had voted for an even larger increase to the asset purchase program than the GBP50B that was agreed. The minutes led to further weakening of GBP and lower bond yields. However, there is speculation that the BoE will be surprised by the strength of the recovery in H2'09 and exit strategies will start to become the theme, which could lead to a strengthening of the GBP.

JPY - The yen continues to struggle in much the manner the USD has of late with reversal in risk and flights in and out of safe-haven currencies. A sign of seeking safety in yen came last week as Japanese five-year notes advanced, sending yields down to the lowest level in more than five weeks, after a sale of 2.3 trillion yen ($24.3 B) in the securities drew the highest demand in more than a year. Five-year notes gained for a fifth day, the longest winning stretch since June, on speculation domestic banks are using deposits to purchase bonds as lending demand slows.

CAD - The loonie benefited last week to the tune of 2.8% vs. USD (1.1118 - 1.0800) on high commodities, an equities surge, and a general return to risk and market investment. Crude oil gained 11.1% in last week's session eclipsing the June 29th high of $72.38/bbl for a two-month high of $72.80/bbl. Commodities appear to be the single driver behind CAD with Canada's consumer prices falling last month to their lowest level since 1953 on an annual basis (-0.9% in Jul. annualized), leading investors to remove bets that the BoC might raise borrowing costs earlier than it indicated. In contrast, Canadian wholesale sales rose in June for the first time in nine months, led by automobiles and food products, adding to evidence that Canada's economy is emerging from its recession.

MXN - The peso gained close to 2% vs. USD last week reaching a yearly high of 12.8330. Mexico's peso dropped the most in three months last week after global stocks tumbled and investors speculated a rally in higher-yielding, emerging-market assets has outpaced the prospects for economic growth. Mexican President Felipe Calderon said his government will propose austerity measures for next year's budget more intense than those implemented this year, the newspaper Reforma reported. Mexico's government may spur inflation should it decide to increase fuel prices by as much as 15% next year to cover an expected revenue shortfall in the budget.

CNY - The yuan is mostly unchanged vs. the dollar at 6.8313. Little change to the yuan is anticipated as the government seeks to ensure stable economic growth. Markets are calling for CNY to rise 0.66% over the next 1 year.