USD - The greenback once again trekked along an uneven path last week as market participants sought to garner insight into the health of the world's largest economy and the direction of its currency, from key economic drivers and market risk sentiment. The dollar remained largely range-bound during the first half of last week, breaking out of its range to stage a brief rally Thursday, on the back of improving Jobless Claims data (initial: 502K during 11/7 wk. vs. 514K prior; continuing: 5631K vs. 5770K prior). However, the ephemeral dollar burst was quickly squelched by the ensuing Trade Balance (-$36.5B in Sep. vs. -$30.8B prior) and U. of Michigan Confidence (66.0 in Nov. vs. 71.0 exp.) reports-ultimately causing the dollar to close the week lower than when it opened. As global risk sentiment has ostensibly been improving, the greenback has been experiencing sellingpressure to fund carry trades for higher-yielding investments. Intra-day dips, notwithstanding, the underlying trend of the DJIA has been upward (10,400 at the time of printing), which by inverse correlation, has been putting downward pressure on the USD. This morning's Advance Retail Sales (1.4% in Oct. vs. -2.3% prior) gave a much-needed boost to market sentiment for an ameliorating US economy, though the USD continues to remain under pressure as risk appetite increases and interest rates remain at historic lows. The Empire Manufacturing Index release earlier this morning, furthermore, serves as an ominous reminder that the ailing US manufacturing sector, together with persistent US joblessness, may ultimately prove to be a drag on any sustainable long-term economic growth. Markets will have plenty to digest later in the week as a battery of key inflation and housing data will take center stage. Markets will also be attuned to Fed Chairman Bernanke's speech this morning about America's economic outlook to further get a sense for the direction of future monetary policy and the true economic state of the Union.

EUR - The euro strengthened vs. the dollar but remained below the $1.50 level. The European Union statistics office reported today that Eurozone consumer prices declined 0.1% in October from the previous year as rising unemployment discouraged household spending. Economists expect European inflation to average 1.2% in 2010, just below the 2% central bank target. Last week, economic reports showed that the E-16 economy was out of recession as GDP grew 0.5% in Q3'09. The ECB continues to signal that it is in no rush to withdraw stimulus measures. With the EUR's 19% ascent against the dollar since mid-February making exports less competitive, the Eurozone may continue to struggle in its recovery.

GBP - The British pound sterling is trading slightly lower ahead of Wednesday's BoE minutes release for hints of possible further quantitative easing. Earlier this month, the BoE said it would increase its Asset Purchasing Programme by GBP 25B. Today, UK property website Rightmove, showed asking prices for houses fell by 1.6% during November. The market will eye UK inflation data on Tuesday and retail sales numbers on Thursday. Expect the sterling to remain weak amid fragile UK economic data, fiscal health worries, and expectation that UK interest rates will remain low for longer than those of most other developed economies.

JPY - News that Japan's economy expanded at the fastest pace in more than two years in Q3'09 propped up the yen today. GDP rose at an annualized 4.8% pace after a 2.7% gain in Q2'09. Speculation that Japanese investors will repatriate money from their US Treasury investments also boosted the yen. Today, the US is expected to make $100.5B in redemptions and interest payments on Treasuries. Despite optimism, yen gains will be limited on concern that Japan's debt grew to almost twice the size of the economy. The BoJ is expected to keep its benchmark interest rate near zero in the near term.

CAD - The loonie began last week with its most volatile daily move in 5- months ranging 2% (1.0543 1.0743) for the day and 3% for the week's session. The G-20 clearly committed to further growth over the weekend, and that helped the commodity currencies like the CAD to rally quite strongly. The currency outperformed 12 of the 16 most-traded currencies tracked by Bloomberg. Crude oil was choppy last week ranging nearly 5% but ultimately closing lower than it began ($78.05 - $76.55). Canada's trade deficit narrowed more than analysts expected in September to a three-month low on rising exports of automobiles and metals. The trade gap was C$927M, compared with a revised C$1.99B in August according to Statistics Canada. Exports rose 3.5% to C$30.3 billion, while imports fell 0.1% to C$31.2 billion.

MXN - The peso also responded to prognostications by the G20 commitment to strong recovery by gaining over 3% on the session for a month-to-date low of 13.0164 vs. USD. The PRI made additional moves toward political leverage last week aimed at current President Felipe Calderon. Mexico's Institutional Revolutionary Party-the largest in the lower house of Congress-favors cutting the government's operational spending in the 2010 budget by at least 85B pesos ($6.4B) from the amount proposed by President Calderon. The party purports to want to spend the money on health care, education and infrastructure instead.

CNY - The yuan is largely unchanged vs. the dollar at 6.8265. The 21- member Asia-Pacific Economic Cooperation group pledged in a statement yesterday to refrain from raising new barriers to investment and trade- an implicit acknowledgment of China's controversial managed currency regime Immediately following the communiqué Chinese Finance Minister Yao Jian stated that a stronger CNY would not be conducive to a global economic recovery and is not fair. Markets are still forecasting the yuan to rise 3.44% in the next 12-months.