USD - The US dollar is modestly lower today as market concerns over a potential debt default by Greece eased. The dollar rose vs. most of the major currencies as investor concern about Greece heightened risk aversion, and on US positive economic news. Retail sales rose a higher than forecast 0.5% in January, while an employment trends report rose by an above forecast 93.2, raising optimism that the economic recovery remains on track. The dollar was also boosted after Fed Chairman Bernanke said in Congressional testimony that the Fed would begin paring back some monetary stimulus measures while keeping interest rates at current levels as signs of economic recovery improve. The dollar is likely to remain underpinned in the near term amid signs of recovery in the US and until investor concerns about Greece are allayed.

EUR - The euro rebounded as further news of a potential Greek bailout emerged. The single currency climbed above $1.37 from lows last week of $1.3529. European ministers told Greece today that any aid would be tied to Greece reining in its bloated budget deficit. A pledge of support by European leaders last Thursday eased pressure on the beleaguered country and lifted the euro from its lows. The euro is also getting a boost today from Germany's ZEW economic sentiment index which came in above forecasts at 45.1. The forward looking report raised hopes that last week's reported drop in eurozone Industrial Production at -1.7% in December remains in the past.

GBP - The British pound continued to be range-bound this week, trading between the low of 1.5560 and high of 1.5765. Inflation remains the main concern for the GBP after Bank of England's Quarterly Inflation Report was released last week. The report showed inflation rose 3.5% in the month of January, with the highest rate of price increase since November 2008. CPI data came out today at 3.5 percent verses 2.9 percent from last month, soothing investor worries and boosting the pound. However, with a spike in prices and a rise in fuel costs, BOE will likely keep credit loose, maintaining a weak sterling for the near term.

JPY - In Asia, the main focus this week will be the release of Q4 09 GDP in Japan. The preliminary reading was released this morning showing solid growth at 4.6% annualized; considerably higher than the market consensus of 3.5%. GDP growth in Japan has mainly been driven by strong exports and a slightly positive contribution to growth from inventories. Overall domestic demand has remained weak, with a 1.7 q/q increase in private consumption being largely offset by a decline in fixed investments. GDP growth to may slow temporarily to 2.4% q/q in Q1 10. For 2010 as whole GDP growth will probably flatten out around the 2.8%.level. The Bank of Japan meeting later today should be uncontroversial. The BoJ is unlikely to step up its non-conventional easing unless Japan enters a double dip recession or JPY strengthens significantly from the current 90 handle. Recent economic data have been encouraging, although the recent strength of JPY against EUR is unwelcome at this stage.

CAD - This morning, Canada's dollar increased to the strongest level against the USD this month as renewed risk appetite spurred demand for currencies tied to growth, but it is underperforming the other commodity currencies. Today's announcement by Finance Minister Flaherty where he provided the details behind plans to bring in tighter real estate lending rules, including an affordability test, could be offsetting some of the more positive CAD developments. Looking to year-end, there are plenty of reasons why the CAD may continue to outperform 1) improving fundamentals in the US are good for the Canadian economic backdrop; 2) on a relative basis Canada outperforms on almost every measure, including economic, fiscal and the aftershocks from the financial crisis; 3) there is limited sovereign risk in Canada; 4) there is a global appetite for Canadian assets - both as a diversification and a commodity play; and 5) sentiment towards CAD remains positive.

MXN - The Mexican peso, the second best performing emerging-market currency this year, continued its growth this week - appreciating over 2% against the US dollar. Speculation that Mexico's bonds will be included in Citigroup Inc.'s World Government Bond Index attracted foreign investors to the nation's securities and currency.

AUD - The Australian dollar rose strongly last week on strong domestic fundamentals. The Aussie rose above $0.90 today, steadily gaining after last week's report showing the economy added 52,700 jobs in January, eclipsing forecasts at 15,000. Unemployment also fell to 5.3% from 5.5% previously. The Royal Bank of Australia announced that further rate increases were likely this year from current levels at 3.75%.