US Dollar
US data is not meeting up to par and as a result, the US dollar has been punished. Even though yesterdayââ,¬â"¢s weak producer price numbers did not translate into similarly disappointing consumer price figures today, the lack of a strong print in CPI was enough for dollar bulls to be convinced that the Federal Reserve does not have the evidence that it needs to raise interest rates again.  The monthly growth of headline consumer prices in July increased from 0.2 percent to 0.4 percent, but the growth of core prices slowed from 0.3 to 0.2 percent. This tepid pace of growth confirms that rates will be left unchanged at 5.25 percent in September, which could especially be true since oil prices have just fallen to a seven week low.  We heard hawkish comments from Federal Reserve President Fisher today about the possibility of the Fed reacting to greater inflation risks, but Fisher is not a voting member of the FOMC so his comments hold little weight.  Meanwhile, the disappointments today did not end there. The housing market is continuing to show signs of weakness with building permits falling by the largest percentage since September 1999. This follows the drop in the confidence of homebuilders to a 15 year low.  We are at a tipping point in the housing market and as soon as the consumer reacts, the whole economy could be affected.  The growth in industrial production is already slowing with only a modest 0.4 percent rise in the month of July.  The turn that we are looking for in the US dollar is here but summer doldrums could still cap gains in the EUR/USD below 1.30.  Aside from the Philly Fed report tomorrow, there is little left on the US calendar that could shift the marketââ,¬â"¢s current sentiment in the US dollar.

Euro
The completely empty Eurozone economic calendar over the past two days confirms that most Europeans are on their summer holidays.  The Euro continued to trend higher, but that was primarily due to dollar weakness rather than news driven Euro strength.  The last of the Paris Club payments made by Russia are due on August 21 so the gradual payments that have been made by Moscow could have also aided in the latest Euro rally.  This support could soon disappear as Russian Deputy Finance Minister Storchak indicated that the last of the payments will be made in US dollars.  This coincides with the fact that the Euro is coming up on resistance near the 1.2900 level and could find it difficult to break that level without the catalyst of market moving US or Eurozone data.  We finally have some European releases due over the next two trading days.  This includes CPI reports for the Eurozone region as a whole, German producer prices and French non-farm payrolls.  All are expected to be muted, which means that they should have a minimal impact on the Euro. 

British Pound
Despite a stronger labor market report, the British pound continued to lose value against the Euro and only managed to registered small gains against the US dollar.  The problem was that the minutes from the Bank of England revealed that the decision to surprise the market with a rate hike last month was not unanimous.  The members voted 6 to 1 for a rate hike and indicated that they wanted to control present inflation risks and that should inflation move in a different direction, they would be prepared to reverse the rate hike if needed in the future.  This is hardly strong words indicative of a hawkish central bank and erased some of the optimism that came off of the stronger labor market report.  The number of claimants increased by a less than expected 2.0k.  Average hourly earnings also increased from 4.1 percent to 3.2 percent including bonuses, which was much stronger than expected.  The behavior of consumers is where everything boils back down to and so far, the labor market report suggests that consumer appetite should remain steady.  However, with oil prices moving back lower, inflationary pressures may not be there for the Bank of England to consider raising rates again anytime soon.  

Japanese Yen
It was another mixed day of economic activity in the Japanese Yen.  The Yen lost value against the Euro, Swiss Franc and Aussie but gained strength against the US dollar and British pound.  According to the latest minutes from the Bank of Japan monetary policy meeting in July when the central bank opted to raise rates for the first time in six years, three of the members of the policy committee voted in favor of a fifty instead of a quarter point hike.  They felt that they wanted to avoid suggesting multiple hikes later on by delivering a larger one upfront.  Unfortunately, in Japan, rate hikes are as much politics as it is economics and politically, the government is against another rate hike in the near term. 

Commodity Currencies: AUD, NZD, CAD
The Australian, New Zealand and Canadian dollars all performed strongly today despite a drop in gold and oil prices.  The Aussie and Kiwi are benefiting from optimistic comments from their respective Finance Ministers with Australiaââ,¬â"¢s Costello confirming that economic fundamentals remain strong and New Zealandââ,¬â"¢s Cullen talking up the uncomfortably strong inflation pressures that the economy faces.  Even though another rate hike is not expected at their next meetings, the hawkish comments from both countries suggest that another one this year is certainly a possibility.  As for Canada, the Loonie rallied today after a sharp rise manufacturing shipments in the month of June.  This is extremely positive for the June GDP report and suggests that the economy is not slowing as much as the market may be anticipating. 

Kathy Lien is the Chief Currency Strategist at FXCM.