US Dollar
The US dollar erased earlier gains after the release of the FOMC minutes from the last monetary policy meeting.  Unfortunately for dollar bulls, the report did not contain enough hawkishness to warrant dollar positive positions at the bottom of the EUR/USDâ�,��"�s recently tight trading range.   Even though the Fed phrased the pause as a delay rather than an end to future rate hikes and reiterated that additional firming may be needed, their later words suggest that this is more obligatory statement than anything else.  Looking ahead, they felt that inflation pressures could ease gradually and that growth could slow more than expected. In fact, the Fed believed that past interest rate hikes could keep growth â�,��"below potentialâ�,� for up to six quarters or 1.5 years.  Their biggest problem is housing, which is also the marketâ�,��"�s biggest worry.  Given the recent slide in new and existing home sales and todayâ�,��"�s drop in oil prices below $70 a barrel, both the outlook for inflation and growth are tilted to the downside.  Todayâ�,��"�s sharp drop in consumer confidence only escalates the concern about growth.  In the month of August, US consumer confidence fell to the lowest level in 10 months.  The drop was the biggest since September 2005 right after Hurricane Katrina hit and suggests that US consumers may finally be feeling the pain of the housing market and the wild fluctuations in oil prices.  If this trickles into spending, we will have a big problem at hand.  With retail sales not due for a few weeks, the more immediate signal from the confidence report can be found in the employment component.  There was a sharp drop in the number of people who felt that jobs were plentiful which suggests that non-farm payrolls may not meet up to par later this week.  Overall, the message to gather from todayâ�,��"�s reports is that the Fed is not likely to hike rates again any time soon and if economic data continues to deteriorate, any possibility of them doing so could shrink to nil.

Euro
The Euro extended yesterdayâ�,��"�s bounce off of the 1.2750 support level.  In fact, the currency pair actually retested that level this morning and found support at the same point once again.  German consumer confidence as measured by the GfK survey remained steady for the month of September which is better than analyst expectations.  This echoes the same message as the smaller decline in the German IFO survey, which is that growth in the Eurozoneâ�,��"�s largest country is moderating, but only modestly.  Adding fuel to Euroâ�,��"�s rise was news from the Financial Times that the ECB could upgrade its growth and inflation forecasts on Thursday for this year and next.  The FT reports that stronger growth in Germany and the up tick in energy prices are expected to encourage the increase.  Although this may create further optimism in the Euro, the main focus will still be the comments from ECB Preside Trichet on Thursday.  Euribor futures are pricing in one more rate hike before the end of the year and Trichetâ�,��"�s comments will be closely listened to in order to confirm or deny the marketâ�,��"�s present view.  Meanwhile in Switzerland, the Swiss July UBS consumption indicator dropped from a downwardly revised 2.111 to 1.881.  Despite the drop, the index is still at strong levels and signal further economic growth.  Combined with the hawkish comments from the Swiss National Bank President Roth and the outlook for the Franc is even more positive.  The currency has already appreciated significantly against the Euro today. 

British Pound
The lack of any economic data over the past two days explains todayâ�,��"�s mixed price action in the British pound.  The currency appreciated against the US dollar but fell against the Euro. Interestingly enough, in todayâ�,��"�s Financial Times, there was an article in the Comment and Analysis section from UK Chancellor Gordon Brown.  He patted the central bank on the bank for being forward looking enough to raise rates by a quarter of point to curb inflation.  As a result of their good work, he felt that growth this year could be above their 2 to 2.5 percent target.  Indeed, the economy is gradually improving and the housing market reports tomorrow are expected to confirm that.  In addition, the distributive trade survey published by CBI is also expected to increase, which would further confirm the improving outlook for the UK economy.  However, with inflationary pressures subsiding, the Bank of England is still far away from raising interest rates again.  As a very clever central bank, this is the perfect opportunity for them to sit back and take a wait and see approach.  It would allow any monetary stimulus to continue to filter into the economy and spur a bit more growth before the central bank needs to tighten conditions again. 

Japanese Yen
The Japanese Yen is mostly stronger against the other majors today as the countryâ�,��"�s unemployment rate dropped from 4.2 percent to 4.1 percent, which was right in line with expectations.  Household spending was slightly weaker, dropping by a more than expected 1.3 percent in the month of July.  Given that the drop reflects a change in the calculation methodology, retail sales tomorrow could be decent as higher bonus payments boost personal income.  Finance Minister Tanigaki said overnight that he is closely watching the yenâ�,��"�s movements against the Euro, after the EUR/JPY currency pair recently hit a record high.  We doubt that the Bank of Japan will take much action since a weak yen helps to boost exports.  The Ministry of Finance has never intervened in the history of EUR/JPY to sell the currency.  Even if we look back to the MoFâ�,��"�s public records dating to 2001, they have never even sold German Deutschmarks against the Yen.  The central bank is far more concerned and more active in the value of the yen against the dollar, which it has both bought and sold over the past 15 years.

Kathy Lien is the Chief Currency Strategist at FXCM.