USD - The dollar's gains stalled overnight against most of its counterparts ahead of the release of Fed meeting minutes. With recent weak economic data, speculation is rising that policymakers may soon announce another round of quantitative easing. The Fed downgraded its outlook for the economy at their last meeting, and data since has done nothing to suggest that their assessment is inaccurate, thus leaving the door open for more stimulus in the coming months. While the first two rounds of QE incited steep selloffs in the dollar, another injection of liquidity might not have the same depreciative effects as other major central banks are aggressively easing monetary policy simultaneously. In fact, central bank stimulus could prove to be supportive for the dollar in the longer term as investors are attracted to the US economy's general outperformance and USD's safe-haven status. On a brighter note, the trade balance shrank in June, coming in at -$48.7B vs. -$50.6B in the previous reading as demand for US exports was more resilient than anticipated.

EUR - The common currency edged slightly higher on expectations of foreign central bank stimulus rather than any encouraging news out of the EU. While some of the pressure on Eurozone policymakers has eased as Spanish and Italian debt yields pull back from their recent highs, the ongoing fiscal struggle makes it clear that Europe is far from out of the woods. Portugal's international creditors may soon have to ease terms of the country's bailout package as the government struggles to meet deficit goals. Last week, Portugal's highest court ruled €2B worth of planned pension and holiday pay cuts unconstitutional. Moreover, with the yield on a 10-Yr Portuguese bond still well over 10%, returning to markets next year looks unlikely, thus making the need for more aid increasingly probable. Meanwhile, Spanish coal miners marched on Madrid to oppose planed cuts to government subsidies as PM Rajoy's administration pushes through stringent austerity measures. While the protests are relatively small, the miners have popular support. Investors are fearful that should the rallies grow in size and possibly slow the country's largest cities, that the government's budget plans could be delayed. As such, the EUR's relative stability at its current levels could be tenuous at best with investors just waiting for the next shoe to fall in order to resume selling the currency.

GBP - Sterling is flat this morning against the USD, but has reached a fresh four-year best against the EUR. The relative safety of British assets is proving quite attractive as investors expect further stimulus measures from both the Fed and the ECB in the coming months. While the BoE may not be quite as proactive, the pound's gains will likely be limited as the Bank recently expanded its own asset purchase program with further easing expected before the end of the year.

JPY - The yen pared early gains during the evening session as investors await a key BoJ decision. The recent weakness in global economic data and JPY strength has certainly added to the case for further easing. However, with yields on government bonds at their lowest levels in more than nine years, the impact of further stimulus could be muted.

Commodity Currencies - The commodity linked currencies moved higher as the relative calm in financial markets prompts investors to seek higher yields. The CAD gained to a one-week high against the USD on the rising price of oil, Canada's main export, and as the Canadian trade deficit unexpectedly widened. Similarly, the MXN rose on improved risk sentiment and as investors expect the US, the main destination for both Mexican and Canadian exports, to increase stimulus measures in the coming months. The AUD snapped a three-day slide this morning, after a report showed that Australian consumer confidence rose to a five-month high despite the apparent slowdown in the global economy. However, the Aussie's recent high levels could come under pressure as an agreement for direct AUD/CNY trading advances. If Australian exporters could directly transfer payment from CNY to AUD, rather than through the USD or JPY, the currency could ease from its lofty levels against both of those currencies.