US Dollar
When political uncertainty brews and wars break out in industrialized nations, the dollar is historically the safe haven for those investors who want assurance that their capital will be there tomorrow.  This time around with tensions popping up on three fronts, an assured 5.25 percent return on a nearly guaranteed US asset seems to be a plan most government bodies, banks and traders are looking at.  The dollar attraction was so much so that not even poor showings in influential indicators of both inflation and economic growth couldn't put the dollar off its pace.  At 12:30 GMT, the dollar was delivered a one-two punch with releases of June import prices and retail sales.  The import price figure, which is a large contributor to overall inflationary gauges in the US, reportedly slowed to a 0.1 percent pace of growth on a monthly scale as the annual read slowed to 7.2 percent.  This was a marked reduction from the previous month's upwardly revised 1.7 percent and 8.4 percent, for the monthly and annum respectively.  The largest relief in prices of foreign goods came on the account of a 10 percent drop in crude oil prices from the high of the month to the low.  However, cheaper foreign goods could not encourage American consumers to liberalize their spending habits.  June headline retail sales denied expectations of a 0.4 percent rise for an actual 0.1 percent contraction.  As sales account for half of total consumer spending, which in turn is nearly three-quarters of GDP, the decline is of no little consequence.  What's more, the other session's important release, the U of M consumer sentiment, was already putting a damper on expectations for inflation and sales for the current month as a drop in the read to 83.0 versus expectations of a rise to 85.6 suggested consumers were more apt to sit on their earnings.  One promising component of the sentiment gauge, at least for Fed Chairman Bernanke, was the change in American's expectations for inflation a year and five years out.  On average, the pool predicts inflation will be around 3.1 percent this time next year and 2.8 percent five years from now, versus the previous month's expectations of 3.3 and 2.9 percent respectively - perhaps reflecting confidence in the Fed chief's performance.  It will be interesting to see if Bernanke mentions today's data in his testimony before the senate on Wedensday.  Despite this wave of disappointment, the dollar was able to hold its own.  This was in large part due to the units value as viable asset in its own right.  As the standoff in North Korea draws in Japan and the teetering of war in the Middle East concerns the surrounding continents, there is an aspect of safety in the renowned stability of the greenback.  Today's price action was a testament to just how important the US dollar is in the currency market and the global market as a whole.

Euro
With no scheduled releases and the market's attention shifting to concerns of what is unfolding between Israel and Palestine, the euro received few aggressive bids.  Instead, going into the weekend, the world will be watching Russia where the topics expected to be brought up in the G8 summit have changed from the row between the US and Russia and global warming to the outbreak of violence in the Gaza Strip.  The two-day meeting of leaders from eight of the world's largest industrialized nations is likely to focus on international politics and possible resolutions to the situations with North Korea, Iran and Israel and Palestine instead of any potential economic topics such as continued pressure on China to revalue the artificially low yuan.  Nonetheless, opinion and policy on the global flashpoints that results from the meet will likely find a place in dictating currency movement.  Monday could revert back to economic fundamentals coming out of Europe as Euro-Zone CPI for June and industrial production for May are on the docket.  The market still holds a bias of unchanged inflation in the region despite the contractions in Germany and France reported yesterday.  Though a surprise contraction wouldn't completely put off a rate hike, it could be a stumbling block for future policy.

British Pound
As with the euro, the British pound found little economic support from its barren Friday schedule.  Instead, political uncertainty was taking center stage as Tony Blair's Labour Party was under investigation for its suspicious connections to wealthy supporters.  Accusations that party officials offered seats in the House of Lords for loans has added a façade of scandal to an already low approval rating for Prime Minister Blair and his party.  While this unlikely to produce any immediate reshuffling of the government, it is another notch higher in the mercury taking the heat under UK politicians.  This is shaping up to resemble the circumstances seen in the eventual change in leadership in Canada from Paul Martin to Stephen Harper in February starting with a scandal within sitting Prime Minister's party.  Next week will turn back to the indicator calendar as a busy week includes housing, CPI, retail sales and GDP reads.

Japanese Yen
After a collective drawing of breath in the currency market, the reaction to last nights Bank of Japan meeting was a collective sigh. The scenario that we favored going into the release - that a 25 bp would be accompanied by conservative rhetoric - came to pass.  The first step in what is expected to be a slow and arduous climb to an overnight lending rate that is comparable to the next nearest lending rate in the Group of Seven seemed a weak threat to the currency's status as the prime carry trade.  Accompanying the decision, officials were quick to insure that the pace would be slow and BoJ Governor Toshihiko Fukui said the bank would keep overnight cash rate "very low" to support growth.  Though the potential snail's pace of rate hikes is upsetting for yen bulls, the decision arguably makes sound economical and political sense.  Politically because some members of Japan's government have loudly objected to any shift in rates as it would stunt growth, and this offers a good compromise.  Economically, though there are positive inflationary pressures, they are not yet near the 1.0 to 2.0 pegged as desirable; and higher lending rates adds a real, additional burden to firms already struggling with oil prices that have reached a fresh record high above $78 per barrel in the past few days.

Kathy Lien is the Chief Currency Strategist at FXCM.