Against the  background of a very quiet economic calendar, the EUR/USD continued its recovery in the European session tonight trading comfortably above the 1.2000 level. Although we focused on the Philly Fed number yesterday, the far more critical report turned out to be the LEI data which printed at *0.7% far worse than then *0.5% expected. The news was particularly troubling given the fact that the Confidence Board recently revised the data collection procedures so that the results would produce a more positive bias. Overall the LEI surprise suggests that the US economy may be under more stress from Hurricane and oil related pressures than the market was led to believe.  With Wilma now stuck in the Yucatan but projected to attack  South Florida this week-end the event risk rests squarely on greenback's shoulders, even if, as meteorologists predict, the storm will weaken from its present Category 4 status.

Meanwhile the euro received a boost from French Consumer Spending and Italian Retail Sales both of which generated better than expected results. French Consumer Spending actually fell *0.6% on a month over month basis, but the decline was far less than the *1.2% market expectation and on a year over year comparison spending grew at a healthy 4.2% rate. The Euro-zone news indicates that the long depressed EU economy is  beginning to recover despite the weight of higher oil prices.

The talk of oil leads us to the yen which briefly dipped under the 115.00 figure in Asian trade tonight as crude futures on Nymex slipped below the $60/bbl for the first time this month. We have long argued that the yen which has produced a string of positive economic results over the past two months, will not rally until oil prices retreat. With tonight's Tertiary Industry Index results printing almost at double of market consensus (1.7% vs. 0.9%) and oil prices wobbling near the $60/bbl level the time for a yen rally may be near.

Boris Schlossberg is a Senior Currency Strategist at FXCM.