USD - The currency market is still showing some concern as the USD is performing better than what the financial market environment would  suggest. Although with the USD-equity correlation remaining very weak, this is perhaps not all that surprising; however, the greenback is stronger  against most majors today, with CAD is leading all, followed by EUR and  then the USD. The recent focus has been very much on the pace of US  economic activity as the second half of 2010 gets under way. After the recent  spate of weaker than expected activity and price data, which have weighed  on the dollar, markets will be looking for more evidence on the state of the  US economy.

This week's economic calendar is shy of US releases apart  from the housing sector. June starts, permits and existing sales plus the July  NAHB home builders sentiment index (actual 14 vs. 16 forecast) are all  expected to reflect the depressing impact on the sector of the ending of tax  credits. Meanwhile, weekly jobless numbers could again be distorted by  seasonal adjustment factors relating to auto plant re-tooling closures. More  interestingly, Fed Chairman Ben Bernanke presents his semi-annual report on the economy to Congress on Wednesday and Thursday.

These sessions  will be closely followed for indications of the latest Fed read on activity and  for the likely response by Fed policy. Earnings season is well underway and  Friday's Bank of America results rattled markets as BoA reported weak  second quarter results and raised concern over the impact of the financial- sector regulation on the industry. (Goldman Sachs reports tomorrow, Morgan Stanley on Wednesday).

EUR - The euro is at 2 month highs vs. the dollar as concerns over the stability of Eurozone countries is overshadowed by worries of a slowdown in the US.  The single currency rose to highs at $1.3007 last Friday after a weak Consumer Confidence report in the US.  The euro remains supported at just below $1.30 today, falling back after a ratings downgrade of Ireland.  Moody's downgraded Ireland's sovereign debt to Aa2, citing eroding financial strength but kept its outlook on the country as stable.  Last week saw Eurozone Industrial Production expanding 0.9% in May, up modestly from the previous month.  Germany also reported today that economic expansion should strengthen in the second half of the year.  As Europe shows signs that its economic recovery is on track while concerns about US growth mount, the euro will likely remained supported in the near term but also subject to further volatility based upon the outlook for the US.  

GBP - There is plenty of interest in the UK, including the release of the minutes of the July MPC (7/21), which is expected to show that Andrew Sentance again dissented from the decision to leave rates on hold, favoring instead an increase in official rates to dampen inflation risks. On the economic front, the preliminary reading on Q1 GDP (7/23) should show the first year-on year growth rate of the current recovery. Focus though is on the sustainability of the upturn and while June retail sales should show good growth they would have been boosted by the World Cup, pre-budget buying and good weather. Meanwhile, public finance figures will focus attention on the problems of the budget deficit. This week's data releases include: CBI Trends (7/20), Retail Sales (7/22).

JPY - The Japanese yen is trading stronger following the lost of Japan's ruling coalition, led by Prime Minister Naoto Kan's Democratic Party of Japan, in an upper house election last week. Finance Minister Yoshihiko Noda hopes that the budget guideline, which will finalize at the end of July, will have the framework to repair the country's massive debt as well as distance the warnings of possible downgrades from multiple credit ratings agencies. Investors are looking forward to the release of Japan's import and export data due on July 25th.

CAD -The Canadian dollar declined over 2.3%, taking the spot of the worst-performing currency last week as investors' worries grew on the uncertainty of US's economic outlook.  As Canada's largest trading partner, last week's poor consumer confidence, sales, and producer price data feared investors into swaying from risk.  Ahead of Bank of Canada's interest rate decision tomorrow, analysts believe that risk should be back into play as crude oil (up +1.00 at $77.08/bbl) and US stocks advanced today.  Furthermore, BoC's monetary policy announcement tomorrow should be interesting as many expects central bank to normalize monetary policy and hike interest rates by 25bps to 0.75%.  

MXN - The Mexican peso gave up close to a percent gain from its strongest level of the month (12.6533), falling to 12.9350 to close the week.  The move was largely contributed to strong pull-backs in risk fueled by poor US economic data.  As Mexico's largest trading partner, poor US sales and employment data out last week suggests that Mexico's retail sales, consumer price index, trade balance, and unemployment  numbers may subsequently be negatively impacted, with figures scheduled for release starting Wednesday.    

AUD - The Australian dollar is lower vs. the US dollar as global growth concerns weigh on the currency.  The Aussie slid to over 1-week lows at $0.8635 following last Friday's US equity selloff and today's Ireland downgrade by Moody's.  Despite this, Australian domestic conditions remain favorable with business and confidence both reported up strongly last week.  Markets are forecasting a 14% chance of a rate hike in August from 4.50% presently.