USD - The dollar consolidated within its ranges overnight as markets thin out before the July 4th holiday in the US. Currency markets are also relatively calm ahead of key economic data and central bank decisions due at the end of the week. Data released this morning surprised to the upside with factory orders gaining by 0.7% versus a consensus forecast of 0.1%. However, last month's reading was revised lower to -0.7%, thus essentially nullifying today's number. Moreover, it will take more than maintaining the status quo to restore confidence after yesterday's unexpected contraction in ISM manufacturing. An IMF report this morning urged US policymakers to act sooner than later to boost economic growth and worry about cutting deficits at a later date as the so-called fiscal cliff looms at the end of the year. The report referred to US growth as tepid, revising annual forecasts down to +2% for 2012. However, as election season shifts into high gear, it will be a near impossibility for the Obama administration to force through a hike in the budget ceiling and more lenient spending cuts. Yet, for the time being, the dollar will remain supported within its ranges as investors are largely sidelined until later in the week.

EUR - The euro is slightly lower this morning, albeit well within its recent ranges ahead of a key ECB meeting later this week. In light of the ongoing regional turmoil, investors are widely expecting an easing in policies from the Bank. That change may come in the form of a cut in the benchmark interest rate, announcement of the direct purchase of sovereign debt in struggling nations (e.g. Italy and Spain), and/or a third LTRO program. Yesterday's rise in regional unemployment to 11.1% and a drop in PMI manufacturing to 45.1 certainly provide the proof for further easing, but with such high expectations comes increased risks. With central banks around the world gearing up for further monetary easing, the EUR could be in for a modest recovery should the ECB either ease by less than expected or not at all.

GBP - Sterling is slightly lower this morning against both the USD and EUR, but is range-bound ahead of a BoE meeting on Thursday. PMI construction data unexpectedly contracted, with the index dropping to 48.2, but British Chamber of Commerce data suggested that the economy in fact grew in the second quarter. Economists widely expect that policymakers will expand their QE program on Thursday, but with the ECB, Fed and BoJ also expected to ease as well, the Bank's actions will have a limited impact on the GBP.

JPY - The yen reversed much of yesterday's gains, but remains well supported within its recent elevated ranges. Investors have found comfort in expectations of a wave of central bank easing, thus crimping demand for the safe-haven JPY.

Commodity Currencies - The commodity linked currencies proved to be the best performers overnight as central bank stimulus will boost demand for these growth-centric currencies the most. Raw goods are sharply higher this morning with oil surging to $87/bb, gold up to $1620/oz, and copper rising to $355/lb. The CAD is nearly half a percent higher this morning against the USD on the rising price of oil, Canada's main export, and as risk appetite rebounds. Similarly, the MXN pushed back to the top of its recent ranges as the uncertainty of the presidential election fades. The AUD edged higher as the RBA kept interest rates on hold after previous cuts buoyed growth. However, with technical indicators suggesting that the Aussie is nearing overbought territory, gains may be limited in the near term. The ZAR was the best performer as investors expect that ECB stimulus will stoke demand for South African exports.