USD - The dollar is stronger against all 16 of its most actively traded partners a day after the Fed disappointed investors hoping for a third round of quantitative easing. Bernanke and Co. did however extend Operation Twist in which they swap short-dated Treasuries for longer-dated assets. They increased the program by $267B and extended it through the end of the year. The Fed cited the persistently slow pace of economic and labor market growth as impetus for the modest easing, and six FOMC members voted to push the timing of the banks first interest rate hike back twelve months to 2015. Even with the dovish outlook, the Fed meeting has provided significant support to the USD as investors' views quickly change focus back onto the ongoing struggles in the Eurozone. Meanwhile, economic data released this morning was mixed. Weekly jobless claims fell slightly to 387k versus last week's 389k, but continuing claims were flat at 3299k. Existing home sale declined by slightly more than expected, dropping to 4.55m from 4.62m in the previous reading while the house price index gained by 0.8%, doubling the consensus forecast. Leading indicators also rebounded, gaining 0.3% after last month's 0.1% decline. However, a manufacturing index for the Philadelphia region fell sharply, registering -16.6 versus an expected flat reading. With stocks and commodities in the red this morning, the dollar's recent strengthening trend appears to again be gaining momentum.

EUR - The euro has quickly receded from its recent surge to the top of its ranges as the region's debt woes come back into view. While Spanish debt yields have eased somewhat from their recent alarmingly high levels, investors are skeptical over Spain's ability to raise the €33b it needs to meet the government's budget needs over the next six months. Spanish banks have increased their holdings of federal debt by €70b in the first third of the year as private investors cut their holdings. However, with Spanish banks struggling to find funding of their own, the fear is that they will either run out of appetite or firepower to prop up the sovereign debt market even with the €100b bailout from the EU. The pressure is likely to only increase in the months ahead as a series of so-called stress tests of Spanish lenders are completed later this summer. While certainly not the intent, the EU loans will add to Spanish government debt, further narrowing its access to markets and thus ultimately increasing its dependency on those lenders receiving bailout funds. While it's clear that European officials are taking steps to backstop the region's faltering economies, without addressing the underlying structural deficiencies, the common currency will remain under pressure in the near term.

GBP - Sterling is mixed this morning, moving higher against the EUR while falling against the USD. With the sell-off in financial markets worsening, the pound has come under increased pressure as investors seek the safest assets. On a bright note, British retail sales unexpectedly gained by 0.9% after last month's 1.1% contraction.

JPY - The yen has continued to weaken overnight even as the risk-off trade gathers momentum. Expectations for further monetary easing from the BoJ are undermining the JPY a day after two new dovish policymakers were appointed to the central bank. Nevertheless, the yen will likely remain relatively well supported as risk aversion drives investors to the yen's relative safety.

Commodity Currencies - The commodity linked currencies are generally lower as the selloff in raw goods steepens. Oil broke below the $80/bbl mark for the first time in nearly a year, gold slipped to $1572/oz, and copper tumbled to $330/lb. The CAD dropped nearly a percent against the USD on the falling price of oil, Canada's main export, and after the disappointing data out of the US. Similarly, the AUD came under selling pressure, falling back towards parity with the USD as risk appetite waned. The Aussie is also lower after Chinese PMI unexpectedly fell to 48.1 from 48.4, but its downside remains supported by the appeal of Australia's AAA credit rating.