USD - The dollar has consolidated within its recent ranges as global financial markets begin the week in the red. Trading volumes remain relatively low with much of Europe shut down for the summer holidays, which in turn has left currency markets listless and choppy. Investors remain focused on developments in the ongoing European debt crisis as well as the prospects for future economic growth in the US for the second half of the year. As of late, domestic data has been mixed, but has been generally strong enough that investors have begun to pare back bets on another round of Fed stimulus, at least in the near term. While this should be supportive of the dollar, weaker demand for the greenback's relative safety has largely offset the positive influences. For the week ahead, the Fed will again take center stage with the release of minutes from their last meeting on Wednesday. Investors will surely parse through the release for any signs of impending stimulus, but no surprises are expected. Elsewhere, investors will take note of existing home sales data, also due on Wednesday, and then weekly jobless claims, new home sales, and the house price index all due on Thursday. The week closes out with durable goods data on Friday. Barring a surprise hint at QE3 from the Fed, expect the USD to remain largely range?bound in the days ahead.

EUR - The euro extended its recent declines against the dollar, falling for a second straight day as Germany strengthened its stance against the ECB's plans to buy bonds in Spain and Italy. Despite signs from German Chancellor Merkel that she's not inherently opposed to the ECB plan, the German central bank is clearly not as supportive. In a monthly release, Bundesbank officials stated that "government?bond purchases by the Eurosystem are to be seen critically and entail significant stability risks." The release went on to state that decisions regarding greater sharing of solvency risks should be taken by governments, not central banks. Germany's opposition sent the EUR lower against most of its major counterparts, but its losses were eased by rumors that the ECB is considering setting sovereign bond yield targets for troubled member nations, such as Italy and Spain. With such divided views, the EUR will likely edge back towards the lower end of its recent ranges even as investors become a bit more willing to assume riskier positions.

GBP - Sterling begins the week within its wellworn ranges against both the USD and EUR with little major data or news to provide direction. The pound has sold off modestly in early trading after an industry report showed that house prices dropped by a record last month, falling 2.4% m/m. The economic schedule is rather sparse ahead of Friday's UK GDP report, with a modestly improved reading expected.

JPY - The yen gained against most of its counterparts overnight for the first day in six as investors reduce bets that Japanese officials will act to slow further gains. BoJ policymakers' steps to weaken the yen have largely failed over the past two years, with the Bank having now refrained from upping stimulus measures since April. Despite a ¥45T asset purchase program, interest rates at 0%, and a massive debt load, foreign and domestic investors alike remain attracted to Japanese government bonds. Consequently, the yen will likely continue to grind higher, albeit gradually, strengthening back towards the 76 handle in the months ahead.

Commodity Currencies -The commodity linked currencies are generally higher this morning despite an initial selloff in both equities and raw goods. Oil fell back to $95/bbl, gold edged lower to $1615/oz, and copper dropped nearly a percent and a half to $337/lb. The CAD rebounded this morning, reaching a fresh three?month high against the USD despite the lower price of oil - Canada's main export - as investors felt generally more positive about global growth prospects. However, this positive sentiment could quickly shift as investors look to reduce their bets on global central bank stimulus measures. This shift in expectations has been clearly reflected in the price of copper - a metal used in a wide array of manufacturing applications. As such, the AUD's overnight gains may prove to be temporary especially as expectations ease of further stimulus measures in China, Australia's main trading partner. Nevertheless, relatively quiet market conditions, and slow gains seen in global equity markets, will continue to provide support for these higher yielding currencies for the time being.

MXN - The Mexican peso is flat from last week after the country's GDP release was mixed. Q2 GDP grew to 0.9% q/q, above the market estimate of 0.7%. However, annual growth of 4.1% was below the 4.3% market estimate. Peso rates will be largely dependent on external data from Europe and China. Domestically, investors will take note of retail sales for June, bi?weekly CPI, the unemployment rate, and trade balance all expected to be released this week.
RMB - The Chinese Renminbi was little changed at the start of the week. The central bank weakened the currency's daily fixing by 0.05% to 6.3478 after commentary in the Financial News suggesting that PBOC has no intention of cutting lenders' reserve requirements in the short term to support the economy. Ahead of any firm statements from the PBoC, the yuan will likely remain steady.