USD - The dollar begins the week towards the bottom of its recent ranges against most of its counterparts after last week's betterthan?expected nonfarm payrolls report prompts a bit of risk assumption. The measure showed that the economy added 163K jobs in July, more than double the average monthly gain throughout Q2, but not enough to keep the unemployment rate from ticking marginally higher. While the report is not exceedingly positive, it has been enough to spark a sharp rally in global stocks and commodities, thus weighing on "safehaven" demand for ultra?low yielding assets such as the USD and JPY. Nevertheless, the labor numbers will likely provide support for the USD in the longer term, as they greatly reduce the immediate need for the Fed to pursue another round of quantitative easing. The economic slate for the week ahead is rather light with no major data due until the latter half of the week. Investors will take note of weekly jobless claims, wholesale inventories, and trade data all due on Thursday. The week then closes out with the import price index and monthly budget statement both on Friday. While the dollar may be under pressure to begin the week, a rebound may be in store on renewed concerns of an impending Eurozone breakup.

EUR - The euro fell from a three?week high against the USD at 1.2444 on a downbeat commentary from Italian PM Monti. "The tensions that have accompanied the Eurozone in the past years are already showing signs of a psychological dissolution of Europe," Monti told reporters. He went on to say that the problems "have to be solved quickly now so that there's no future uncertainty about the Eurozone's ability to overcome the crisis." The comments have proved to be rather counterproductive with the yield on Italian debt reversing recent declines after the ECB laid out a path to direct debt purchases late last week. However, the comments have served to undermine the EUR's gains, keeping it within its recent ranges against the USD as Eurozone policymakers surely appreciate the support a weaker currency provides for the region's export markets. As such, rangebound trading is likely, with a negative bias likely returning as the outlook for the Eurozone deteriorates further.

GBP - Sterling is beginning the week lower against both the USD and EUR this morning after a report showed British house prices falling by more than expected. While the UK's double?dip recession appears to be deepening, no immediate central bank action is expected after the BoE upped its asset purchase target to £375B at their July meeting. Investors will however take note of the Bank's updated outlook for the economy due on Wednesday. A weaker outlook would prompt expectations of further monetary easing, but with the BoE's major counterparts remaining on hold for the time being, any action does not appear to be imminent.

JPY - The yen drifted back towards the higher end of its recent ranges in early trading, despite the modest return of investor risk appetite. However, expectations of further BoJ easing are on the rise with Japanese leading index data falling overnight by more than expected to 92.6 from 95.2 in the previous reading. Investors will take note of current account data due on Tuesday and Machine orders on Wednesday ahead of a BoJ meeting set to conclude on Thursday.

Commodity Currencies - The commodity linked currencies are generally stronger this morning as rallying financial markets prompts investors to seek higher yields. The CAD retested parity with the USD after weakening past par on Friday afternoon. Rallying stocks and the rising price of oil have both contributed to the loonie's strength as has last week's NFP report out of the US - the main destination for Canadian exports. Similarly, the AUD is near a four?month high against the USD ahead of decision from the RBA due after hours on Monday. Investors appear fairly certain that the RBA will remain on hold today, with swaps showing a change in rates only with a 16% probability. The AUD is thus deriving support from the hawkish policy outlook as it will likely remain the highest yielding G10 currency.

MXN - The MXN has also found support in rising commodity prices as well as the strong NFP report out of the US -the main destination for Mexican exports. With CPI data due later this week expected to show inflation edging higher, the MXN will likely remain supported by the rather hawkish outlook for Mexican Monetary policy.

RMB - USD/CNY fixing came in at 6.3353, while the CNH range held between 6.3750 ? 6.3785. The PBoC released its Q2 monetary policy report last week, reiterating that they will increase support for economic growth. The meeting minutes stated that the Bank is still concerned about downside pressures and will proactively use monetary policy tools to try and navigate a soft landing for the economy.