USD - America's currency managed to close out last week higher against its major world counterparts, though the ephemeral rally quickly lost steam this morning on the back of dovish Fed rhetoric.  A battery of key data last week, though somewhat mixed, nevertheless undergirded the dollar, bolstering sentiment that a nascent economic recovery in the US was well underway:  Empire Manufacturing (23.51 in Nov. vs. 34.57 prior); Inflation Data (PPI:  0.3% in Oct. vs. -0.6% prior; CPI:  0.3% in Oct. vs. 0.2% prior); Total Net TIC Flows ($133.5B in Sep. vs. $25.3B prior); Housing Starts (529K in Oct. vs. 573K prior); Initial Jobless Claims (505K for 11/14 vs. 505K prior).  Finally, the knock-out punch needed to deliver an ultimate victory to the USD for the week was the very robust Philly Fed Index (16.7 in Nov. vs. 11.5 prior).  The greenback, however, broke momentum this morning and fell the most in two weeks against its major trading partners, save the JPY, after St. Louis Fed President Bullard commented that policy makers should keep stimulus measures in place beyond March [2010].  However, a better-than-expected Existing Home Sales (6.10M in Oct. vs. 5.70M exp.) this morning buoyed the dollar somewhat, helping to counter the greenback's precipitous slide.  Markets are currently focused on the fate of US (and global) monetary policy(s).  After this morning's Fed comments, traders have become bearish on the probability of interest rate hikes anytime in the foreseeable near-term.  Fed Fund Futures contracts on the CME now show a 31% chance that the Fed will raise interest rates by June 2010, compared to 67% odds from a month ago.  Both the DJIA and Gold are up this morning (10,474.50 and $1170.40/oz, respectively), reflecting a market dichotomy that while markets are bullish on economic growth, they remain cautious, fearing that the incipient recovery is fragile and potentially short-lived.

EUR
- The euro rose buoyed by positive economic data from Europe.  The single currency rose to highs of  $1.5001 overnight following  the  release  of an above-forecast Eurozone PMI of 53.7 in November.  The report marked the third consecutive month of increases and made further inroads above the 50 threshold separating growth from contraction.  Improving prospects have raised the outlook for GDP to continue to expand, albeit at a moderating pace this year and further in 2010.  E-16 GDP grew 0.4% in Q3'09 and is projected to expand 0.3% in Q4'09.  Based upon this, the euro is likely to remain underpinned as the global economy recovers.

GBP - This morning sterling gained for the first time in five days against the dollar as commodity companies led shares higher amid growing confidence that the global economic recovery is gathering pace. Revised Q3 GDP numbers on Wednesday are likely to dominate in the UK with markets anticipating some downward revision to the provisional estimate of a contraction of 0.4%.  However, any revisions are unlikely to be sufficiently great to change the view that the UK is lagging the US and the Eurozone in terms of the economic cycle, even though BoE policy maker Andrew Sentance in an interview said a modest economic recovery is under way. Also important for UK markets this week will be the MPC's appearance before the Treasury Select Committee tomorrow, as well as its testimony to the House of Lords the following day.  Last week's release of the minutes of the November policy meeting show that the MPC remains somewhat open to the prospect of further monetary stimulus. Any further indication in this direction could weigh on the GBP.

JPY - Increased demand for higher-yielding assets hurt the yen as investors increased their carry-trade positions, helping advance global equity and commodity prices.  The yen was little changed against the dollar as both countries have low interest rates with 0.10% and 0-0.25%, respectively.  Last week, the BoJ reiterated that it will maintain low borrowing costs to support growth even though they have cited that growth is picking up.  Unemployment numbers will be reported later this week.  Today is a market holiday in Japan.

CAD
- In a move characteristic of recent risk reversal trends in the markets the loonie gave up nearly 3% of the previous week's gains last week. Canada's currency began the week at a monthly low of 1.0430 vs. USD before ultimately retracing those gains to a high on the week of 1.0722.  Crude oil saw much of the same fortunes ranging 5% from a low of $76.35/bbl to as high as $80.19/bbl.  Natural gas continues to struggle with the $5.00 barrier ranging as high as $4.7230 and dipping as low as $4.18 for an 11.5% trading band on the week. Sales increased 1.4% from a month earlier to C$41.7B, according to Ottawa Statistics.  Canadian home re-sales rose to a record in October, as low mortgage rates fed a rebound in consumer confidence. Sales rose 5.1% to 45,818 units in Oct. on a seasonally adjusted basis.

MXN
- US auto demand is helping pull Mexico's economy out of its worst recession since the 1930s and spurring sales at companies from Alfa SAB to Grupo Kuo SAB. Mexico's finance committee in the lower house of Congress approved the spending portion of the 2010 budget, calling for 3.18T pesos ($243.9B) in total outlays.  The shortfall including Pemex debt will be 2.75% of GDP, the widest since 1989. According to Finance Minister Augustin Carstens, Mexico will require $8B in international financing next year and expects to raise $5B to $6B from multilateral organizations. Manufacturing saw a rebound last quarter showing -9.9% y/y in Q3 from -16.5% in Q2. Q3 GDP also saw a marked improvement, coming in at -6.2% y/y from Q2's dismal reading of -10.1%.

CNY
- The yuan is slightly higher vs. the dollar at 6.8301.  Chinese annual economic growth is estimated to reach 10% in Q4 and grow even faster next year, according to government reports.  Markets are calling for the yuan to strengthen 3.11% over the next 12-months.

Last Week's Currency Highs and Lows and Forecast

CurrencyHighs and Lows Last WeekForecast
EUR1.5016 - 1.48021.5064 - 1.4875
JPY

89.75 - 88.58

89.59 - 88.02
GBP1.6878 - 1.6461

1.6726 - 1.6598

CHF1.0223 - 1.00481.0160 - 1.0011
AUD0.9406 - 0.90610.9338 - 0.9134
CAD1.0733 - 1.04261.0733 - 1.0450
DKK

5.0277 - 4.9550

5.0300 - 4.9615

NZD

0.7524 - 0.7201

0.7409 - 0.7192

MXN13.1329 - 12.9468

13.1000 - 12.9468

SGD1.3924 - 1.38151.3892 - 1.3822
TWD32.362 - 32.04932.369 - 32.100
ZAR7.6170 - 7.33677.6028 - 7.5416