USD - The USD begins the week slightly lower against most of its major counterparts, but remains firmly entrenched towards the top of its recent ranges. However, the dollar has largely retraced sharp gains seen last Friday morning following the release of disappointing labor market data with both, nonfarm payrolls and unemployment, falling short of expectations. Equities and commodities ended their worst week of the year with multi?percent drops, but the pace of decline has eased on growing expectations that global central banks may be spurred into action in the coming days. This morning, factory orders unexpectedly fell by 0.6% in April while ISM New York tumbled to 49.9 from 61.2 in the previous reading. Tomorrow, investors will take note of ISM non?manufacturing with a flat reading expected. The week closes out with weekly jobless claims on Thursday and trade balance on Friday. Fed Chairman Bernanke testifies before Congress on Thursday about the outlook for the US economy and with the central bank's current easing program, dubbed Operation Twist, coming to an end later this month, investors are hopeful that a third round of quantitative easing may be hinted at. However, with interest rates already at record lows across the yield curve, the efficacy of further bond?buying may prove limited. As such, the dollar will likely remain well supported in the near term, garnering safe?haven demand amidst the risk?off trade atmosphere.

EUR - The EUR has rebounded off its recent lows against its major counterparts, but remains near the bottom of its ranges as the region's debt crisis appears to be spreading. After Spain made headlines early last week as a plan to assist Spanish financial institution Bankia secure funding was rejected by the ECB, Prime Minister Rajoy upped the ante by calling for an EU banking union on Friday. German Chancellor Merkel quickly rebuked the notion, toughing her opposition to Eurozone debt sharing, thus highlighting the growing divide amongst the Eurozone member nations. Portuguese policymakers announced this morning that they are injecting €6.6B into the country's three largest lenders, making them among the most capitalized banks in Europe. While Portugal has adhered the strict austerity measures required of its €78B EU/IMF/ECB bailout, with unemployment surging past 15%, growth must be addressed in the near term. Meanwhile, Eurozone unemployment recently reached a record high and manufacturing output fell for a 10th straight month. As such, all eyes are on the ECB with a meeting scheduled for this Thursday. President Draghi has shown he is not afraid to ease policy, thus adding to speculation that the central bank may cut rates further or announce another LTRO. While either action would be negative for the common currency, in the near term, they may prove supportive as volatility will likely abate, at least temporarily.

GBP - Sterling begins the week near the bottom of its yearly ranges on growing expectations that stagnant economic growth will prompt further monetary action from the BoE when policymakers meet later this week. However, with a British holiday keeping investors at home today and tomorrow, the pound will likely continue to trade within a relatively narrow range in the run up to the MPC's meeting. The economic docket is rather light this week with PMI construction due on Wednesday and PMI services on Thursday.

JPY - The yen remains well supported towards the bottom of its recent ranges, but has failed to make a convincing break below the key 78 handle
against the USD on growing expectations of imminent central bank intervention. Japanese corporations and policymakers alike have voiced their concerns with an appreciating yen. However, it appears investors are still fearful of pushing the JPY too low, which will greatly increase the odds of a bout of central bank yen selling. With the ongoing crisis in Europe and the slowdowns in the US and Chinese economies, the yen's status as a relatively safe asset will continue to be supported in the near and longer terms.

Commodity Currencies - The commodity currencies remain under pressure this morning, but have found support towards the bottom of their recent ranges. Raw goods have extended last week's sharp losses with oil dropping to $83/bbl, gold down to $1615, and copper flat at $334/lb. The CAD begins the week over the 1.04 handle against the USD for the first time this year as it looks to extend its losing streak to six?weeks. The BoC meets tomorrow with policymakers expected to keep rates on hold despite signs of improvement in the Canadian economy. Last month, Bank Governor Carney said that interest rate hikes may be necessary as growth has surpassed projections, but as the debt crisis in Europe and slower pace of global growth weighs on confidence, investors are now pricing in at least a 0.25% cut in interest rates by the end of the year with an 81% probability. Meanwhile, the AUD rebounded off its recent lows even as speculation builds that the RBA will cut interest rates at their meeting tomorrow. With a quarter or half percent cut expected, investor's have turned sharply bearish on the Ausie. While central bank action will garner attention this week, investors will also take note of Australian GDP on tomorrow and Canadian unemployment on Thursday.

MXN - The Mexican peso continued its slide against the greenback as the US, Mexico's largest trading partner, released worse than expected production and employment data. Domestically, economists raised their estimate for economic growth in Mexico to 3.72% from 3.62%. With US
production and commodity prices going down, the peso will likely remain weak against the safehaven dollar in the near?term.

RMB - The yuan fixing came in at 6.3276 with the CNH ranging between 6.3739?6.3655. The headline non?manufacturing PMI index for May came in lower than expected by 0.9pp at 55.2. This is relatively weak by historical standards, but is still decisively above 50. The national PMI new orders index was down 0.2pp, at 52.5, with the construction sector at 54.2 and the services sector at 52.1. Look for the currency to hold close to current ranges despite heightened risk aversion.