USD - The dollar is mixed this morning, rising against many of its G10 counterparts while paring some of its recent gains against the commodity-linked and emerging market currencies. With little major economic data due today, financial markets are listless thus limiting the USD to trade within its recent ranges. However, with the relative calm in equities, investors are taking the reprieve to assess the outlook for global growth as well as returns on their assets. In light of the ongoing economic crisis in Europe and apparent slowing growth in the US and East Asia, this reflection has provided support for higher yielding currencies from nations that are growing relatively well (e.g. the AUD, MXN, ZAR, and SEK). That said, as G10 interest rates converge near 0%, the dollar will remain well supported against its main trading partners.

EUR - The euro fell to a fresh two-year low this morning as the delayed effects of last week's ECB interest rate cut put it under pressure. Much of the argument for a relatively strong EUR as compared with the USD, GBP and JPY was its modest yield advantage. However, after last week's cut to 0.75%, and with further reductions expected before the end of the year, the case for holding EUR is weakening. Further adding to the negative outlook for the Eurozone, investors appear to be acknowledging German Chancellor Merkel as the winner in her opposition to Eurobonds. While Germany capitulated to demands for relief for Spain and Italy at an EU summit at the end of June, Merkel was unwilling to budge on the joint issuance of debt. Since then, yields in the remaining AAA-rated EU nations (Germany, Finland, and the Netherlands) have fallen by more than 30bps, highlighting the continued demand for safety and core assets. Further fiscal integration also looks to be a tough pill to swallow with Northern European nations recently voicing their concerns with an EU banking regulatory body. While the EUR's losses remain moderate thus far, the lack of cooperation amongst the regions member nations could prove detrimental with even modestly negative economic data or developmnts.

GBP - Sterling is mixed, gaining against the EUR while falling against the USD after divergent economic data was released. Industrial Production unexpectedly advanced by 1% last month versus the 0.2% contraction that was anticipated. However, an estimate of GDP showed the economy contracting by 0.2% in the second quarter versus a 0.1% expansion in the previous reading.

JPY - The yen continued to strengthen overnight as investors pare expectations that the BoJ will ease monetary policy later this week. With yields on Japanese government securities already at a nine-year low, the effects of further stimulus would likely be limited. Moreover, calls for a weaker yen are waning as Japanese manufacturers have adjusted accordingly with their currency having now remained relatively strong for more than three years.

Commodity Currencies - The commodity linked currencies remain supported this morning as investors seek their relatively high yields and attractive economic growth. Raw goods are generally lower with oil falling to $84/bbl, gold down to $1585/oz, and copper slipping to $339/lb. The CAD pared early gains, but remains supported despite the falling price of oil - Canada's main export. The AUD and NZD are also relatively flat this morning despite signs of further economic weakness in China, Australia's main trading partner. On Monday, Chinese CPI declined by more than expected sparking expectations that the PBoC will extend its easing cycle. Moreover, data this morning showed China's trade balance nearly doubling from last month with falling domestic demand for imports reflecting the broader economic slowdown. Exports also declined from last month, but beat expectations as foreign demand proved more resilient than anticipated. The MXN was the best performer overnight, gaining by 0.5% against the USD as investors are attracted to relatively high Mexican yields. Moreover, the Mexican economy is on track to grow 4.0% in 2012, an enviable statistic and even better than the 3.9% pace recorded in 2011.