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USD - The dollar is regaining its footing amid investor concerns over the sustainability of the economic recovery. Despite the Fed's assessment that the economy was leveling out in its accompanying statement after leaving interest rates unchanged last week, markets were caught offguard by several gloomy reports that brought lingering doubts back to the forefront. Retail Sales slid -0.1% in July despite the success of the government's vaunted Cash for Clunkers auto program. The University of Michigan sentiment survey, an index of consumer confidence, also came in below forecast at 63.2 (vs. 68.5 est.). The weaker reports highlight concerns that despite improving economic conditions, US consumers which comprise 2/3rds of economic growth, remain cautious. Global equity markets fell overnight to start the week on heightened risk aversion, in turn boosting the dollar, on lingering concerns that many obstacles to a global economic recovery remain.

EUR - The euro fell to 2-week lows vs. the dollar on heightened risk aversion. The single currency fell to lows at $1.4044 from last week's peaks above $1.43. News that improved exports helped lift the Euro Zone trade surplus to an above forecast EUR 4.6 billion failed to provide much support for the euro. Both imports and exports remain well below last year's levels. Last week also saw Industrial Production falling a weaker - 0.6% in June and Q2 GDP at -0.1%, an improvement from -2.5% previously. Germany, Europe's largest economy, grew a better than forecast 0.3% in Q2 leading many to suggest the economy has bottomed. While acknowledging Germany's improved economic prospects, ECB member Axel Weber warned against prematurely the financial crisis to be over. Risk aversion will likely remain the primary driver of euro strength until signs of a sustained recovery emerge. JPY - Risk aversion has helped push USD/JPY below its 200-day moving average as the yen has gained for almost six consecutive sessions against the USD, up 0.3% today. One month trend support for USD/JPY gave way last week, neutralizing the bullish tendency in the pair. The Japanese economy has now emerged from its recession, growing 0.9% q/q in the second quarter according to preliminary estimates. Exports and public investment were major drivers of growth, however residential and private capital investment remained very weak, highlighting the poor demand conditions in Japan's private domestic sector.

GBP - The British Pound opened lower today at 1.6500 and is likely to remain on the back foot on speculation that economic data due for release this week will add to signs the recession has further to run. On Friday night the pound traded between a low of 1.6483 and a high of 1.6606 with many investors on the sidelines in the lead-up to tomorrow's inflation data.

CAD - The Loonie saw mixed fortunes last week trading a little more than a 2% range (1.0808 - 1.1059) with volatile commodity & equity markets. Crude oil traded between a two-month-high of $72.42 and a session low of $67.40 (6.7% range) as the market begins to react to robust inventories, mild weather, reduced demand and an uneventful storm season. It appears crude may have exhausted it's upside range for the near term. Natural gas continues its struggles as well unable to sustain the $4.00 level retreating to its current $3.15. The Dow also saw a reversal of fortune losing almost 200 pts. (9433.86 - 9241.60) as investors took a step back from risk.

MXN - Market participants speculate that Mexico's peso, the worstperforming Latin American currency in the last 12 months, may climb 4.5 percent by the end of the year after it closed below a so-called neckline of a head-and-shoulders pattern it formed on a chart. The peso slid 1.1 percent this morning to 12.9926 from 12.8465 on Aug. 14. The peso has weakened 22 percent in the past 12 months, making it the worst-performing currency against the dollar among six major Latin American currencies tracked by Bloomberg. CNY - The yuan is lower vs. the dollar at 6.8365. The pace of China's economic expansion slowed in July, leading many to suggest that the government will keep the yuan stable. Markets are forecasting a modest 0.15% appreciation in the yuan over the next 12-ms., the lowest level since March.