USD - The USD continued to pare gains last week as a return to risk appetite diversified investors out of their recent ‘safe-haven' USD holdings. The USD Index, a measure of the dollar's performance against the 16-mostactivly traded currencies, gave up 1.2% (79.36-78.42) overall last week. The world's reserve currency seems to be experiencing difficulty finding direction or breakout ahead of Friday's Q2 GDP numbers. The second quarter earnings season should fulfill the desired demand for at least ‘slow growth' being sought by the markets to restore the USD rally of late. Adding weight to this scenario was last weeks breach of the ‘psychologically significant' 9k level on the Dow as well as a report indicating that new home sales rose the most in eight years last month. With that said, analysts reported that the worlds largest economy shrank 1.5% on an annualized pace through the second quarter of this year asserting that recovery is still underway but by no means assured in the short term. Many are looking to the G-10 summit underway this week for further indications as to global efforts to restore growth and stabilization. Topics to be discussed will be; the USD as the worlds reserve currency, the unwinding of stimulus efforts as well as climate change and other environmental issues.

EUR - Last week the euro traded within tight ranges (1.4095 - 1.4291) as investors continued to gauge risk appetite amid mixed economic data. The euro rose near a seven-week high when it touched $1.4291 as the French business confidence production outlook improved. Earlier last week the euro was hurt by declining European industrial orders. Helping the euro later was the composite index of manufacturing and service industries in the Eurozone and a measure of German business confidence which improved. Today the euro is higher against the dollar as German consumer confidence increased to 3.5, a 14-month high, which beat forecasts of 2.9. Investors will look toward more Eurozone confidence reports to see if the economy is beginning to improve. JPY - The yen declined as global recovery optimism encouraged investors to exit the safe-haven currency. Talk that analysts raised their profit forecasts for U.S. companies for the first time in two years helped global markets surge, which unwound some of the safe-haven positions in the yen. Last week's news that Japan's exports declined 35.7% to its slowest pace this year helped the yen stay afloat. Meanwhile, imports stayed relatively stable falling 41.9% from a year earlier, from a 42.4% decline the previous month. Strong investor appetite will keep the yen weak in the near term.

GBP - The sterling is down this morning as it suffers from weak economic data. It lost ground against most majors as the Q2 growth figures came in at a disappointing -5.6% y/y. Economic numbers were also released showing the UK economy contracted 0.8% in the second quarter, caused by slumps in the finance and construction industries. The decline was more than twice what was forecast my economists. Although there has been much recent attention on problems in commercial real estate in the UK, there continues to be talk of the UK exiting its quantitative easing strategy. In the week ahead, the Bank of England will release data showing the amount of mortgages approved by banks to be half of what they were two years ago.

CAD - The loonie continued its meteoric rise last week shaving another 2.5% off the USD as commodity and equity markets continued their rallies. Crude oil added another 7% to its gains ($63.55-$68.02) for a monthly high. The BoC scaled back the average size of its temporary purchases of securities from major investors such as bond dealers last week just days after it purchased C$4B ($3.61B) of securities. This appears to signal that there is less need for their three programs aimed at easing credit markets. Canadian retail sales rose 1.2% to C$34B ($30.8B) led by sales of automobiles and personal care products, posting a fourth gain in five months. Canada's unemployment rate rose to 8.6% in June- the highest level since February 1998.

MXN - The peso benefited as well from higher crude oil prices and a return to riskier commodity based currencies. The MXN added 1.8% (13.4162-13.1660) last week, its largest weekly gain since May, and a 1.6% gain on Monday alone based upon speculation the Central Bank's seventh consecutive interest-rate cut this year will shore-up the slumping economy. Banco de Mexico lowered its target lending rate last week by .25% to 4.5% as expected. Mexican unemployment rose to a record in June (10.78%) and economists predict the recession in Latin America's second-largest economy may fuel more job losses through the middle of next year.

CNY - The yuan was little changed vs. USD (6.8311). There was no economic data to affect the yuan as the currency continues to stay stable.