USD - The USD is headed into the weekend mixed against a number of its major counterparts as stocks and commodities edge lower. With the risk-on trade easing, the dollar is finding support in its continued role as a "safe-haven" asset. Moreover, expectations of further Fed monetary easing are being pared back this morning after the import price index declined by less than last month, falling just 0.6% versus June's upwardly revised 2.4% contraction. Today's reading did fall short of an expected gain of 0.2%, but with domestic food prices expected to soar in light of the worsening drought in the middle of the country, headline inflation may be set to tick higher. As such, investors will be paying close attention to next week's producer and consumer price reports, with any pickup in inflationary pressures likely prompting investors to cut their bets on a third round of quantitative easing, at least for the time being. In the meantime, the USD will likely remain within its relative narrow ranges with little further news to provide direction.

EUR - The euro has pared early declines on resurgent risk appetite despite a negative outlook for Germany, the Eurozone's largest economy. The Germany Economy Ministry cited the ongoing Eurozone debt crisis as the largest obstacle as it "is again hav[ing] a burdening influence." They also reported that the business climate in Germany has clouded "markedly and signals the risk of a weaker development in the coming months. [The debt crisis] fuels uncertainty and leads to restraint in the economy." Meanwhile, yields on Spanish and Italian debt are again on the rise as the outlook for the region as a whole deteriorates. Moreover, investors remain skeptical of whether either nation will be willing and/or able to accept the ECB's stringent budget requirements before the central bank will buy their bonds. Meanwhile, the market is still awaiting the final approval of the ESM - the region's permanent bailout fund - with a German court decision hopefully due in mid-September. However, members of the opposition German party are now threatening to hold a referendum on plans for further fiscal and political integration within the Eurozone. While referendums have been taboo in Germany since WWII, Finance Minister Schauble also suggested overturning the tradition as Germany's role in combating the regions' crisis meant the "boundaries of the constitution would be reached sooner than we had thought." With such uncertainty ahead, it will be difficult for the EUR to rise above its recent ranges, at least for the time being.

GBP - Sterling is headed into the weekend higher against both the USD and EUR after a report showed that the British economy may have shrunk by less in Q2 than previously forecast. A measure of building output fell 3.9% in the three months through June, better than the 5.2% drop that was calculated in the first estimate of Q2 GDP. The revision on its own would result in a 0.1% upward revision in GDP, which was estimated at -0.7%. While the data has been supportive of a rally in the GBP, gains are likely to be limited as a 0.1% gain in economic growth won't be enough to keep the BoE from easing monetary policy further.

JPY - The yen surged back to the top of its recent ranges after Japan's Upper House approved a sales tax hike. The move comes just a day after Fitch warned of a ratings downgrade should the bill not pass, thus adding extra weight to the decision.

Commodity Currencies - The commodity linked currencies are modestly lower this morning, but generally remain near the high end of their recent ranges. Raw goods are lower with oil falling back to $92/bbl, copper at $339/lb, and gold flat at $1621/oz. The CAD looks to end the week near its highs as investors buy CAD denominated assets at the fastest pace in more than a year. Rebounding oil prices are providing support for the loonie on their own, but also underscore the BoC's unique position as the only G7 central bank likely to hike interest rates in the next twelve months. The AUD pulled back from a four-week high against the USD after Chinese trade data fell short of expectations. China's overseas sales rose just 1% in July versus an estimate of 8%, and far short of the 11.3% gain recorded in June.