USD - The dollar has edged modestly higher overnight against many of its major counterparts as fears over the pace of global growth persist. Yesterday's disappointing reading of ISM manufacturing - coming in at 49.6 vs. the 50.0 that was expected - certainly provides impetus for further expectations of Fed easing, however the decline was not so drastic that extraordinary measures will likely be forthcoming. However, while the Fed has said that it needs to see "substantial and sustained" evidence of an uptick in growth to remain sidelined, the continued economic growth, albeit sluggish, would suggest that a third round of quantitative easing would be more modest than the first two. Clearly Wall St. is not yet convinced that policymakers are close to agreeing on QE3 with stocks looking to extend their declines from yesterday afternoon. There is also some speculation that politics are having a hand in the Fed's wait?and?see stance. If the Fed kicked off QE3 at their next meeting, sending stocks significantly higher and giving the labor market a much needed boost, Bernanke and co. run the risk of being called Democrats as the improving economic data would likely see President Obama reelected. However, inaction may be just as bad with the market pegging the Fed for being pro?Republican as declining jobs numbers might be candidate Romney's ticket into the White House. Either way, investors will get a read of non?farm productivity and unit labor costs today with a rise to 1.9% and a fall to 1.6% expected respectively.

EUR - The EUR has fallen back from its recent highs overnight as speculation builds that the ECB is planning to ease monetary policy further at their meeting this Thursday. While further clarification on the Bank's proposed bond purchasing program was expected, it appears that ECB President Draghi is committed to reasserting the Bank's relevance in the increasingly mired European financial landscape. In his most compelling case yet for his bond buying scheme, Draghi told Eurozone lawmakers that "we cannot pursue price stability now with a fragmented euro area because changes in interest rates affect only one or two countries at most. They have no importance whatsoever in the rest of the euro area." He went on to say that "Frankly, all this also has to do very much with the continuing existence of the euro." Consequently, the EUR will likely remain well supported within its recent ranges, but the longer term view of a weaker common currency remains intact. It will take a significant amount of time for ECB bond buying to translate into eased lending conditions, which in turn will hopefully foster jobs growth and ultimately an uptick in consumption. However, a weaker EUR might just be the policy tool that will help Europe dig itself out of the economic hole that it finds itself in.

GBP - Sterling is slightly lower against both the USD and EUR this morning with technical indicators suggesting that a further retracement of recent gains may be in store. The BoE begins its two?day policy meeting today, and while continued slow growth in the economy might suggest a further loosening of policies, most investors are expecting the Bank to remain on hold. A measure of service sector activity released this morning showed a surprise jump in the gauge to 53.7 - the highest in five months - from 51.2 in the previous reading. While the rise in services are likely a direct result from the bump in tourism earlier this summer during the Olympics, the uptick will likely provide a boost to GDP as well. Thus, the GBP may gravitate back towards its 200?day SMA near the 1.57 handle, but losses will likely be limited.

JPY - The yen is flat this morning despite a volatile overnight session after the Japanese federal government delayed taxgrant payments to local prefectures. The decision is due to policymakers at loggerheads with one another, with the main opposition party unwilling to pass on the tax relief until PM Noda calls early elections. Meanwhile, the BoJ is on high alert this morning with possible further monetary easing in both Europe and the US possibly forcing into action to contain any significant gains in the yen.

Commodity Currencies - The commodity linked currencies are generally lower this morning on persistent fears over global growth. Raw good prices are in the red with oil falling to $95/bbl and gold slipping to $1,692/oz. The CAD is modestly lower, largely due to the weaker price of oil - Canada's primary export - but losses have been limited this morning with the BoC set to conclude its monthly meeting later this morning. Unlike its counterparts in Europe or elsewhere in North America, the BoC has remained rather hawkish in its policy stance, remaining the only G10 central bank to have not adjusted its policies lower in the past 12 months. The AUD extended its recent declines overnight on persistent fears of a global economic slowdown, but recovered from steep early losses. Investors will take note of Australian GDP figures due later this afternoon just a day after the RBA kept interest rates on hold, citing resilient growth as their reasoning.