The foreign exchange market was mixed at the start of the week, as the greenback advanced on the British pound while losing ground against the Canadian dollar. The US equity market stabilized somewhat following Friday's sharp losses, with the Dow Jones and S&P 500 edging up by around 0.6% and the Nasdaq firmer by almost 0.9%. Crude oil ended the session near its highs, up by more than 0.6% at $76.48-per barrel.

The July NAHB housing market index printed weaker than anticipated at a reading of 14 compared with a downwardly revised 16 figure in June. A barrage of housing market data are slated for release this week including housing starts, building permits and existing home sales. The data are largely expected to point towards continued sluggishness in the US housing market, with demand declining after the expiration of the tax credit earlier this year.

Markets will also pay close attention to Fed Bernanke's semi-annual Congressional testimony on Wednesday and Thursday. In light of the recent FOMC minutes, in which the Fed expressed a more dovish tone and downgraded its growth outlook for the coming year, Bernanke is expected again to express a cautious appraisal of the economy. Traders will be keen to gauge the Fed's view on how sharp the economic pullback can be and determine whether additional methods for policy easing are likely upon further deterioration in the economy.

The Bank of Canada will announce the results of its policy deliberations on Tuesday at 9:00 AM and is expected to lift interest rates by 25-basis points to 0.75%. Canada's economic reports point toward further strengthening in fundamentals and continue to support additionally tightening from the BoC over the remainder of the year. The accompanying policy statement from BoC Governor Carney will be closely scrutinized to discern the scope and timing for additional policy tightening. Markets are anticipating the BoC to implement further rate hikes, with the year-end interest rate seen at 1.25%.