• Stronger Data Fails to Clarify the Uncertainty Around the Dollar
• Mixed Eurozone Data Leaves Euro Unchanged
• Increased Consumer Spending in Japan Boosts Yen

US Dollar - Despite some intraday excitement, the dollar struggled to make any meaningful move today.  Indecision reigns high in the markets with the EUR/USD trapped within a 1.1980-1.2080 range since the beginning of the week.  The greenback range traded throughout the Asian and European trading sessions, then fell significantly following better US data, but proceeded to retrace most of its losses for the remainder of the US session.  These days, traders seem to question both good and bad data.  Even though the final release of GDP for the second quarter was unrevised at 3.3%, both personal consumption and the GDP price index was revised higher.  The arguments for the reliability of this release is fairly obvious with the market quickly talking about how even though Q2 growth and demand was solid, Q3 growth should be much less impressive.  Much of the growth in the second quarter was attributed to a surge in motor vehicle sales, which are much weaker now.  Economists have already slashed their forecasts for third quarter growth.  Jobless claims were more interesting though, rising by only 356k compared to estimates of 418k.  According to the Labor Department, Katrina accounted for 279,000 jobless claims since it struck at the end of August.  The government had originally forecasted 400,000 jobs to be lost as a result of Katrina.  The question is then whether the worst is now behind us.  Whether the answer is yes or no, we are still in for some ugly non-farm payroll numbers next week.  As of today, Bloomberg reports that the consensus around the street is that payrolls are expected to fall by 168k in the month of September.  If we do have a negative reading, it would be the first since May of 2003.  Dollar traders are still keeping an eye on commodity prices.  Oil is up $0.43 while natural gas climbs to yet another all-time high.  Trading could be interesting during Asian trading today with Fed President Stern and Kohn both speaking this evening. 

Euro - Conflicting Eurozone economic data has not made it any easier for the EURUSD to recuperate some of its recent losses today.  French producer prices were softer than expected, but Italian retail confidence came in stronger than expected.  In Germany, the ILO unemployment rate surged to 9.3% from 9.0% in August.  The number of unemployed people increased by 39k, which was far higher than the 12k drop that the market had anticipated.  However, the report is somewhat distorting since 80k unemployed people who were not added to the number of unemployed individuals before due to processing problems are now included.  Tomorrow, we have another day of heavy Eurozone data, but we doubt that it will have that much of an impact on the currency pair's price action.  Confidence across the region is expected to remain steady, but given the recent political uncertainty, the risk is probably to the downside.  French unemployment and GDP data are also slated for release and given the recent trend of data, growth is predicted to be weak.  Meanwhile an emergency meeting was called by EU foreign ministers to try to renegotiate Turkey's bid to join the EU.  Turkey has threatened to walk away from the talks if they are offered anything less than full membership.  A breakdown in the talks could be perceived as euro negative since it may deal another blow to confidence in the "euro project."

British Pound - A slew of data hit the wire this morning for the U.K. economy, although only a few notables garnered traders' attention.  Largely anticipated was the Nationwide housing report for the month of September in addition to mortgage approvals and net consumer credit lending.  According to the Nationwide building society, housing prices actually showed stabilization in the month as they fell gently by 0.2 percent.  Although a subsequent decline occurred, officials noted that consumer interest remained buoyant as mortgage approvals rose above consensus estimates of 99K to 107K.  Subsequently, net lending on residentials rose to 7.6 billion pounds, considerably higher than the previous 6.5 billion in the previous month.  Prompting the increasing demand looks to be latent interest as the consumer previously waited on the sidelines ahead of the 25 basis point rate cut decision by the Bank of England.  The most recent report by Nationwide is now sparking nascent suggestions that housing valuations may rise once again, although the notion teeters as average prices are only 1.8 percent higher in the annualized comparison.  Nonetheless, market participants may see some hope as the bleeding seems to have stopped, at least for now.  At the same time, consumers may also be attempting to curb everyday spending as suggested through the net consumer credit figure.  Expected to rise to 1.5 billion pounds, the figure was below estimates at 1.3 billion.  Suggestive that consumers remain unwilling to increase personal spending, at least they are reconsidering property values.

Japanese Yen - Feeling more confident of economic prospects, consumers in the world's second largest economy increased spending for the month at a healthy 1.5 percent rate.  This is the first time in three months and only the second since the beginning of the year that monthly retail sales figures showed any signs of life.  Now with consumers' interest revitalized, one of the last pieces of the puzzle has been fitted.  Underpinned by rising job prospects and wage growth, sales figures were on the positive as sales of fuel and fuel related products rose 14.9 percent on an annualized comparison.  The rise comes as a surprise with most economists expecting a 0.6 percent increase and declines in both department and supermarket store sales for the month.  As a result, now with consumption running at a healthy pace, speculation looks to arise over near term evidence that prices could pickup.  With that said, looking ahead, economists will now contemplate today's data in conjunction with further broader data later.  Slated for release, the government will announce household spending figures, consumer prices and overall production.  Any further up ticks in the releases and the market will hear nascent echoes of central bank hikes.

Kathy Lien is the Chief Currency Strategist at FXCM.