USD - The USD begins the week with renewed momentum, but its gains are quickly slowing in the North American session as equity markets rebound from early declines. The dollar remains well supported within its recent ranges, albeit towards the lower end, as concerns over European solvency and global economic growth keep investors on edge. The price of oil has again become a cause for concern with WTI rising as high as $109.75 this morning as it appears that the conflict with Iran may be coming to a head. The rising price of crude is translating into the highest seasonal prices on record at the gas pump, which threatens to derail the recent rally in financial markets as consumers allocate thinly stretched incomes away from consumption and more towards fuel. Nevertheless, US data has remained relatively supportive as of late with housing and labor market numbers finally showing signs of improvement while regional manufacturing rebounds from declines seen in the second half of 2011. Investors will take note of durable goods, consumer confidence and Richmond Fed manufacturing index on Tuesday. The middle of the week sees the most recent reading of GDP and Chicago PMI. On Thursday, the market will take note of personal income, jobless claims and ISM manufacturing.

EUR - The euro held near 2 ½ month highs vs the dollar ahead of an anticipated injection of central bank liquidity this week as rising energy prices tempered gains. The single currency climbed to $1.3478 overnight, just shy of last week's peak at $1.3486 on optimism that Greece will be able to meet its upcoming debt payments next month. The ECB is expected to inject another EUR 500 billion in liquidity on Wednesday following an operation last December to ease funding pressures on beleaguered member countries. The Long Term Refinancing Operation will provide banks with cheap money with maturities of 3 years to aid in purchasing sovereign debt. The LTRO is providing a boost to the euro while the region grapples with slowing growth. Industrial new orders declined 1.7% in December YoY in the region in further signs that economic activity is declining. Despite this, the euro is likely to remain underpinned in the near term as the additional liquidity from the LTRO eases pressures on banks and member countries.

GBP - The pound, while basically flat against the dollar week over week, is sharply weaker against the EUR over the same period. It fell the most in eight months against the euro as BoE minutes showed two policymakers voted for a larger increase in asset purchases than agreed upon at this month's meeting. The two, Miles and Posen, voted to add 75 billion pounds to the central bank's stimulus plan versus the finally agreed upon 50 billion - stating that the economy was in a precarious situation. This follows a report confirming that GDP was negative last month. This week brings consumer confidence, expected to rise for a second consecutive month, and mortgage approvals, also expected to increase.

JPY - JPY is stronger, up 0.5% against the USD and gaining on the crosses as markets display an aversion to risk at the start of an event?heavy week. Some retracement is expected, given that USD/JPY has rallied nearly 6.0% in the month of February, driven by a combination of factors that include central bank policy and weakened economic data. These factors have shifted sentiment away from yen, with the net long JPY position down to $2.7bn, a level not seen since mid?2011.Near term JPY movement will likely be driven by external events ahead of employment and CPI data set for release on March 1st. The CPI figures are important for the outlook on JPY given the BoJ's recently announced 1.0% inflation target. The BoJ is expected to act aggressively to ensure on?target inflation and will expand its balance sheet as required.

Commodity Currencies - Despite the increased focus on Iran, crude oil fell for the first time in eight days this morning on growing concern that the European debt crisis may slow the global economy and reduce fuel demand. Prices dropped as much as 1.4% after the IMF warned the world economy is not out of the danger zone amid fragile financial conditions. CAD, having lost 0.5% against the USD and underperforming on the crosses, is currently sitting close to parity. With markets favoring risk on Friday, the NZD rallied to touch levels above 0.8380 against the Greenback. As no local releases were scheduled, markets took their direction from geopolitical events. The AUD extended last Friday's rally despite developing political uncertainty in the country's ruling Labor Party. However, Australian PM Gillard remains head of the ruling Labor party after defeating her predecessor Kevin Rudd in a leadership challenge. Although AUD/USD remains at the upper end of its 12?month range, technical analysis continued to suggest downward movement in the near term.

MXN - The Mexican peso fell against the US dollar despite better?than?forecast US data and a week of risk taking. The USD/MXN opened the week at 12.9051, 1.70% higher than last week's close as Mexico's unemployment rate rose to 4.9% in January, a reversal from the 4.51% of December. However, seasonally adjusted figure reached a rate of 4.79%, down from the prior reading of 4.99%. With the ECB expected to carry out a liquidity operation this Wednesday, the peso may continue to remain pressured in the near?term.

RMB - CNY is higher as fixing comes in at 6.2985 after the State Administration of Foreign Exchange (SAFE) stated that the yuan exchange rate is moving to a more stable level. The administration will focus more on crossborder capital flows to fight speculation, but they will also look towards lifting certain capital controls to allow the development of the FX market. Investors will look toward Wednesday's PMI data where expectations are for a reading of 50.9, higher than last month's 50.5, signaling that although China's manufacturing may be slowing there is still some resiliency in the sector.