The single currency strengthened against the dollar on Friday as data showed eurozone economy is stabilising and German business morale is rising, which suggested that economic activity in the region is improving. The German Ifo business climate index increased to 87.3 in July fm 85.9 (compared to the consensus forecast of a reading of 86.5) while German PMI manufacturing and services indices rose by more than expected. The strong-than-expected data boosted euro to session high of 1.4255 against the dollar. However, price retreated in New York session as a drop in the U.S. consumer confidence index in late July to its lowest reading since April slightly dented risk sentiment. The University of Michigan confidence index fell to 66.0 from 70.8 compared to the consensus forecast of 65.0.

The British pound dropped versus the dollar on Friday as U.K. GDP for the second quarter came in weaker than expected, dampening hopes for a quick economic rebound. Growth data showed the U.K. economy shrank 0.8% on the quarter, taking the annual decline to 5.6%. That was far worse than forecasts for a 0.3% fall after a hefty 2.4% drop in the first quarter. The data not only suggested recovery could be slower than previously expected but also added fuel to speculation over addition stimulus measures from the Bank of England on top of the existing 125 billion pound quantitative easing program. The pound slid to an intra-day low of 1.6390 against the dollar in New York morning before stabilising. Cross selling on sterling versus euro also weighed on the pound as eur/gbp rose from 0.8573 to as high as 0.8675.

U.S. Federal Reserve Chairman Ben Bernanke told Congress on Friday that taking on formal responsibility for supervising the broad health of the financial system would be a natural outgrowth of the central bank's existing duties. He also stated that financial stability is integral to the achievement of maximum employment and price stability, the dual mandate that Congress has conferred on the Federal Reserve as its objectives in the conduct of monetary policy.

Federal Reserve Chairman Ben Bernanke will speak on Monday. Data to be released next week include Japan CSPI, German Gfk index, import price index, U.S. new home sales, Midwest manufacturing on Monday, New Zealand trade balance, Australia NAB business confidence, U.K. CBI distribution trade, U.S. consumer confidence on Tuesday, Japan retail sales, German CPI and HICP, U.S. durable goods orders on Wednesday, New Zealand rate decision, U.K. Nationwide housing price, German unemployment change, unemployment rate, eurozone, business climate, economic sentiment, U.S. jobless claims, Canada PPI on Thursday, U.K. Gfk survey, Japan manufacturing PMI, National and Tokyo CPI, unemployment rate, construction orders, housing starts, eurozone unemployment rate, HICP, Switzerland Kof indicator, U.S. GDP, PCE index, and Chicago PMI, Canada GDP on Friday.