USD - Resurgent political turbulence in the Middle East led to a prominent risk-off tone in markets today, with the Libyan regime seemingly on the edge of toppling as violence in the country escaktes. US stocks fell this morning as the situation in Libya prompted investors to move away from riskier assets, providing a pause after the market's six-month rally. On the data front the US trading week was kicked off with conference board consumer confidence for February. The release came in above expectations at 70.4, building upon last month's upward revision to 64.8. University of Michigan consumer confidence is due out on Friday, but no change is expected as rising gasoline prices continue to dampen consumer sentiment. Additionally, housing data is out on Thursday, with both new home sales and existing home sales are expected to fall somewhat after December's massive gains in both figures. Therefore, moderate declines of 3.3% m/m and 0.3% m/m, in new and existing sales respectively are expected. January data for durable goods orders will be released on Thursday with figures expected to regain some of last month's lost ground by growing 2.5% as the December decline was largely due to a massive 99.5% drop in non-defense aircraft orders. Finally, we are due to get quite a few Fed speeches, with a majority of the hawkish leaning members speaking throughout the week.

EUR- The euro climbed overnight overcoming t risk aversion that gripped the market amid continuing political instability in the Middle East. The euro rose to highs at $1.3703, rebounding from lows at $1.3524 hit after oil rose above $100 on continuing unrest in Libya. The euro's nearly 2 cent rise to the upper end of recent ranges came after ECB policymakers said the central bank is ready to fight inflation by increasing interest rates when needed. The statement echoed recent comments from other ECB policymakers and highlights mounting inflation pressures as Europe's economic recovery gains traction. Euro zone GDP estimates as reported last week grew 0.3% in Q4 while the region's Purchasing Manager's Index (PMI) at 58.4 in February showed continuing gains from 57 the previous month. Euro volatility will likely continue as risk aversion and inflation concerns pull the currency in opposing directions.

GBP - Sterling starts near where it left off last week, largely relegated to its recent ranges as investors weigh the prospects of higher British interest rates against continued unrest in the Middle East. On one hand, investors have flocked to relatively safe currencies like the USD, CHF and JPY as protests turned deadly in Libya, but increasing speculation that the BoE will tighten monetary policy in the near term has provided support for sterling. In a clear sign that the hawkish faction of the BoE is gaining support, policymaker, Martin Weale, told reporters on Monday that a small increase in the rate may prevent a more rapid tightening later.

JPY - The JPY pared its recent decline as global financial markets seek relatively safe investments. Global risk tolerance has taken a step back over the weekend with intensifying protests in North Africa and the Middle East spurring investors to buy safe assets like the yen. A devastating earthquake in New Zealand further bolstered the JPY and Japanese bonds, despite warning of further downgrades of Japan's debt rating from Moody's. While the Japanese economy faces significant difficulties of its own, focus on unrest in the Middle East will keep the yen well supported back towards the high end of its recent ranges.

CAD - The CAD remained within reach of its recent 3-year highs, but the continued unrest across North Africa and the Middle East has investors on edge. Crude oil was up nearly nine percent in early trade on political turmoil and violent protests in Libya, the first OPEC member to face popular protests similar to those that already brought down long-standing regimes in Tunisia and Egypt. While global markets are wary to assume riskier assets, swiftly appreciating crude prices will provide sufficient support for the loonie in the near term.

MXN - The Mexican peso closed out last week on a positive note following the release of improved US housing data and the news of growing US inflationary pressures. At the start of this week, geopolitical risks played a role in driving risk aversion flows, with upheaval in Libya and earthquake in New Zealand pressuring the peso. Domestically, Mexico's bi-weekly CPI for February is expected to post a 0.20% gain vs. the previous 0.17%. Meanwhile, trade balance for January may widen to - 295mm vs. the previous -218mm.

AUD - The AUD begins the week on the defense, pushed lower by a recent wave of risk aversion. With global markets already on edge over continued unrest in the Middle East, a deadly earthquake in nearby New Zealand encouraged investors to pare back their bets on higher-yielding, but riskier assets like the AUD. However, the drag from the New Zealand earthquake will likely be temporary for the AUD, and soaring commodity prices will provide significant support in the near term.