USD - The USD is off to a strong start this Monday morning as the market's appetite for risk has all but evaporated with stocks and commodities both extending their losses from last week. Despite S&P's move to downgrade the US credit rating earlier this year, and increase calls for the end of the dollar as a global reserve currency in a time of crisis, investors clearly still want to be holding the dollar with its deep liquidity and relative stability. Moreover, US data has begun to improve, suggesting that the recent slowdown has been just as Fed Chairman Bernanke repeatedly has called it, a soft patch, and that a double-dip recession is not a foregone conclusion. The week has started with some encouraging numbers, with ISM manufacturing beating expectations at 51.6 versus a forecast for 50.5. Construction spending also unexpectedly reversed last month's declines, gaining by 1.4% versus an expected contraction of -0.2%. Factory orders will be closely watched on Tuesday with a flat reading expected, and private payrolls data due on Wednesday are expected to show a modest decline from last month. However, the week will be dominated by the all important unemployment and nonfarm payrolls reports due on Friday, with NFP expected to show a modest gain after last month's surprising flat reading. In the near term, with stocks and commodities extending recent declines as the prospects for global growth dim, the USD will remain well supported as the default safe-haven thanks to its role as the primary global reserve currency.

EUR - The euro sank to 8-month lows vs. the USD as mounting concerns over Greece cast gloom over markets to start the week. The single currency fell below $1.33 after Greece's admission that its deficit would exceed targets set earlier this year, sending global markets lower on risk aversion. Greece projected its budget deficit at 8.5% of GDP, exceeding the 7.6% agreed upon by the EU/IMF as a condition for aid and despite harsh austerity measures to rein in spending. The news cast doubts over a second bailout for the beleaguered country and adds to Europe's difficulties amid signs of an economic slowdown. Manufacturing data today showed that activity in September slumped to its lowest levels since the 2009 financial crisis with the region's Purchasing Manager's Index (PMI) slumping to 48.5 (a reading below the 50 threshold denotes contraction). The euro is likely to remain under pressure as it grapples with risks of a second recession amid a global downturn while attempting to come up with a plan to rescue its troubled member countries.

GBP - After an early rally last week, the pound has retreated to last Monday's levels despite a better-than-expected manufacturing release this morning. The gauge on manufacturing rose to 51.1 versus 48.5 expected. This shows expansion, but was not enough to strengthen the pound as the overall outlook for the U.K. economy remains bleak. The BoE is meeting on the 6th to determine their next move in rates and are expected to leave them at historically low levels as well as leave their asset-buying plan at 200 billion pounds.

JPY - The stability in USDJPY continues, with the pair essentially unchanged from Friday's close and extending the very tight 2.5% range that it has been in since August. This type of stability is surprising with today, Japan's Q3 Tankan coming in as expected at 2 (well above Q2's ?9) and large manufacturers expect the exchange rate in 2H11 to be 81.06, which equates to a yen that is 5% weaker than current levels, but equivalent to the 12?month average. Today, USDJPY is threatening a close above the 50?day moving average of 77.00.

CAD - The CAD pared early losses this morning on the strong manufacturing data out of the US, Canada's largest trading partner. Nevertheless, the loonie remains near the lowest levels against the dollar in more than a year as general risk aversion weighs on higheryielding, cyclical currencies. Much of the CAD's decline can also be attributed to the dramatic slide in the price of oil, having fallen by more than 30% from its recent highs above $110/bbl reached earlier this year. For the week ahead, investors will take note of both Canadian and US employment data due on Friday, but with global financial markets set to extend recent declines, the loonie will likely remain under pressure in the near term.

MXN - The Mexican peso remained under pressure against the greenback, but was unable to sustain above the 14.0000 psychological mark. Continued concerns of a potential Greek debt default are driving the weakness of both the peso and economic growth in the entire North American region. There is also speculation that the Mexican central banks will be cutting rates this year, which will make the peso less attractive.

AUD - The AUD extended its declines this morning after closing out one of its worst month's in recent years. The Aussie fell by more than 10% in the September as fears of a global slowdown weighed heavily on the growth-sensitive commodity currencies. As data out of Asia, Europe and the US have weakened, the AUD has fallen back below parity with the USD, and a break above in the near term appears unlikely. The precipitous drop has mirrored a larger slide in the price of copper (-24% in Sept), one of Australia's primary mineral exports used in a wide array of electronics and manufacturing applications, as investors pare back expectations of economic growth through the end of the year and into 2012.