US Dollar
Continuing momentum from yesterdayâ�,��"�s hawkish bias infiltrated the FX markets throughout the North American session, boosting the greenback against most of the majors on the day.  With no economic data to garner major moves, traders took to comments by two Federal Reserve members that hinted further at higher inflationary figures and resultant hikes in benchmark rates.  According to Governor Susan Bies, inflationary pressures continue to remain at levels â�,��"higher than Iâ�,��"�d like to seeâ�,� as she now joins the general consensus following Chairman Bernankeâ�,��"�s statements from Monday.  Comparatively, comments by Kansas City Fed President Tom Hoenig seemed slightly more dovish, but still remained at the crux of the overriding speculation.  Expressing the price increases overall should abate as growth tapers off slowly in the near future, Hoenig mentioned that core inflationary figures continue to be at the high end of the presidentâ�,��"�s comfort zone.  Bullish comments like this have underpinned dollar strength in the past 48 hours and look to do so in the near term.  The only trump card that pundits hold will be the anticipated trade balance data set for release on Friday.  Granted, the momentum has shifted in favor of dollar bulls as further hikes are expected at the end of the month.  However, with core prices only hovering 0.1 percent above the 2 percent benchmark target, the trade data could very well shift things back to pre-comment levels and reverse greenback favoritism.

Euro
Euro data was somewhat tepid as most traders look ahead to the European Central Bank decision later on in the week.  Preceding the eventual decision, and garnering focus for the day, the finance ministers of the 12 nations sharing the euro met to discuss the current prospects.  Notably, it was established that the region had benefited from considerable reforms and an uptick in global demand.  However, given the current assessment, concern emerged as the existing rate of growth is expected to taper off into 2007 as higher energy costs are expected to contribute adversely to the overall economy.  The European Commission is expecting a 2.1 percent rate of expansion in the currency years as overall inflation continues to charge ahead at a 2.5 percent clip, well above the 2 percent guideline used by central bankers.  With ECB President Jean Claude Trichet and fellow central bankers holding vigilant, it should be interesting to see the outcome of this weekâ�,��"�s decision.  Expected to raise interest rates by 25 basis points, speculation is leaning towards a possible 50 basis point rate hike as policy makers desire an iron weighted hand in controlling price increases while stabilizing growth at a rising pace.  The results of todayâ�,��"�s meeting are surely to weigh on the future decision with expectations already pricing in further rate hike bias.

British Pound
The British currency continued to shed value over the London and New York session confluence Tuesday with the only releases on hand for fundamental positioning - the BRC Retail Sales Monitor for total and same store sales.  Representing an estimated 80% of UK retailers, the indicator was both a comprehensive read of the sectorâ�,��"�s general health while also enjoying the special trait of being one of the last indicators that the Monetary Policy Committee can encompass into its deliberation of whether to move or pass on an interest rate change at the meeting that culminates in a rate announcement on Thursday. The same-store measure rose for the second month in May by 3.6%, while total sales advanced 6.2%. Contributing more than a generous portion to the rise were recorded purchases of consumer electronics ahead of the World Cup soccer event. This was a welcome rise given the steady, high level of consumer energy products and the drop in the GfK NOP measure of consumer confidence for the same month.  Nevertheless, this indicator is unlikely to produce any real sway amongst policy member come the actual rate decision.  Traders and economists overwhelmingly expect the central bank to pass on any change in policy, but comments that will accompany the decision will be hungrily digested.  With the previous minutes showing a single vote for an increase and one for a decrease, and the trade up in new members not quite complete; there is sufficient room for speculation amongst the new member.

Japanese Yen
Following yesterdayâ�,��"�s momentum, yen sellers continued to pound the pavement, taking the major currency pair through the 113 figure in the New York market hours.  The culprit remained the rather dovish comments submitted by Deputy Governor Toshiro Muto at a banking conference yesterday in Washington.  Citing that the Bank of Japan continues to see lower interest rates in the near term, Muto effectively took the wind out of previously established yen longs even as news hit the wires of the greatest appreciation in the Yuan since the revaluation.  Adding to misery, the benchmark equities index, the Nikkei 225, declined to a four and a half month low in the overnight as the specter of higher rates spooked investors.  Now down 4 percent on the year, the index adds to recent questioning of the current optimism even as central bankers continuing dovish jawboning in efforts to keep interest rates and speculation on the domestic currency low.  As a result, sentiment looks to continue heading into mid-week action even as the market expects the release of economic data tomorrow.  Anticipated to dip, the leading economic index is expected to decline as a result of the equity benchmark component while the coincident is estimated to have increased.  With both being a compendium of already released report, any surprises should see muted reactions.

Kathy Lien is the Chief Currency Strategist at FXCM.