It's Columbus Day in the United States, which means a quiet market with many investors at home to begin the week. From tomorrow the long grind to Thanksgiving begins during the fall. There is very little action to get our teeth into this morning. we should point out that Friday's dollar revival based on Mr. Bernanke's comments surrounding a normalization of interest rates has all but run out of steam against the euro. At $1.4786 the euro has recaptured much of Friday's losses.

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As investors rethink the Bernanke comments, they ponder what might cause an acceleration of a move out of the Fed and realize that there is nothing to do so. That means that the euro will likely rally swiftly back to last week's $1.4817 peak as investors try to squeeze out more dollar bulls on the way to $1.50.

The euro is also strong today against the pound, which faces a fresh challenge after a local forecast from the CEBR said that interest rates in the U.K. could be on hold through 2014 but were unlikely to rise until 2011 at the very least. Because such a flat line for monetary policy would be indicative of an unexciting level of growth the pound will lose strength according to their line of reasoning. The accompanying prediction is for parity against the euro and $1.40 against the greenback. Currently the euro is up to 93.39 pennies and is at a seven month high against the pound. The pound at $1.5830 is at a five month low.

The dollar rose earlier in the day against the Japanese unit only to give it all back. Currently the yen stands at ¥89.79. Investors earlier sold yen on the view that corporate earnings surprises were boosting stock markets making the appeal of higher yields more evident. Analysts say that Japanese investors have a strong desire to put money to work outside of the nation, which could further weaken the yen.

The Canadian dollar continues to outperform its competing commodity-linked ally from Australia, although both units are higher relative to the greenback so far today. The Aussie is seeing lesser gains having been buoyed over recent weeks and specifically after the RBA unexpectedly decided to raise interest rates.

Investors now see fewer catalysts to accentuate the Aussie dollar and as we noted on Friday the yield curve is actually flattening as investors analyze the scope for the RBA to lift rates eternally. The Aussie's gains above here may be predicated on a pause in its recent gains, possibly caused by investors banking some gains. The catalyst for further gains, once again could be built upon a buy the dip mentality. The Aussie stands at 90.67 U.S. cents.

The so-called loonie is racing away to a fresh 14-month peak against the greenback. Last week's strong job creation report is clearly acting as a catalyst for investors thinking about how quickly the Bank of Canada may have to raise rates, inadvertently increasing the local dollar's yield advantage against the U.S. dollar. Today the Canadian dollar buys 96.80 American pennies.

Andrew Wilkinson

Senior Market Analyst