USD - Although the dollar is stronger across the board in response to the disappointing ECOFIN meeting in Poland, the degree of appreciation may well be tempered by the key event of the week - the FOMC meeting - with the announcement due on Wednesday. Given the tone of recent data and the spike in market volatility, markets will be keenly awaiting the central bank's policy response and its comments on the economy. In light of last week's disappointing jobs report and the continued deterioration of financial conditions, the Fed is expected to take action and provide new stimulus. The most likely outcome will be the elimination of the 0.25% interest rate on reserves, along with a shift in the structure of the Fed's portfolio towards holding more long-term rather than short-term government bonds, in order to reduce long-term bond yields. With the exception of  existing home sales, not much positive news is expected to come out of the US housing market this week. A drop is expected for both building permits and housing starts in August, in the light of recent months' uncertainty, which has depressed some major longer-term investment such as housing construction. On the bright side, existing home sales should show a small gain after weak figures from the past few months.

EUR - The euro weakened to almost a seven-month low against the US dollar as talks among European Finance Ministers regarding Greece's default produced little advancement on key issues, such as that of collateral demands on the part of European nations contributing to the second Greek Bailout. Adding to the concern, there is news that only 75% of bondholders had signed up for the proposed Greek bond rollover. Furthermore, news that Germany would postpone the implementation of any legislation in reference to the European Social Fund (ESF) also kept the markets on the defensive. The market is speculating that Troika of the IMF, EU, and ECB, are hesitant to release the financing for Greece. The scheduled conference call later today may provide additional clarity, uncertainty will likely further dampen demands for the EUR in the nearterm.

GBP - The GBP has been one of the better performing currencies against the USD this morning, but begins nearly 1% lower than last week's close. The weakness is twofold, coming at the hands of risk aversion and also as investors increase bets that the BoE is near a second round of QE. The Bank published an article this morning that painted its last round of quantitative easing as a runaway success. However, the downside pressure on the pound has been partially offset by the relative attractiveness of British government assets as mainland European officials are still unable to resolve the Greek debt crisis.

JPY - JPY is catching up on the risk-aversion flows that we're seeing today with the DJIA down over 200 points. The market is probing to see how serious the Bank of Japan is about defending these current levels. If USD-JPY approaches the 75 level, that's where the further threat of BoJ intervention is likely to occur. Economic Policy Minister Motohsa Furukawa signaled in remarks yesterday that Japan may be seeking to counter the strong JPY as early as tomorrow. The JPY has risen 8% in the past 3 months, the best performer among G-10 currencies in that period.

CAD - The CAD begins the week with the biggest drop in more than a month against the USD after the weekend's meeting of European financial leaders disappointed investors. As such, global financial markets and commodities are starting deep in the red, reducing demand for higheryielding assets. However, while the loonie will likely continue to underperform its North American counterpart, it appears less susceptible to weakness as compared with the other commodity currencies. Investors will take note of key inflation data due on Wednesday and a key speech from BoC Governor Carney on Friday.

MXN - The Mexican peso headed to its longest losing streak in 13 years, declining for its eight straight days, as risk aversion flows set in amid concerns of Greece's debt default. The peso has fallen 6.5% against the greenback for the year, the worst performer among major Latin American currencies tracked by Bloomberg. As contagion in the Eurozone remains a key concern for investors, the peso will likely stay pressured in the nearterm.

AUD - The AUD tumbled by nearly 2% against the USD in early trading, but was far from the worst performer as investors shift capital away from high-yielding and riskier assets. The spike in risk aversion comes after a failed meeting of European finance ministers, leading investors to worry that Greece will not meet the obligations required to receive another tranche of its bailout package in the coming weeks. This week in Australia is light on data, but investors will pay particularly close attention to the release of minutes from the RBA's last meeting. With futures markets pointing towards a dovish bias, any mention of policy easing will likely weigh on the Aussie in the near term.