US Dollar
Advance retail sales data couldnâ�,��"�t come to the US single currencyâ�,��"�s aid as the dollar, overall, fell on the session against the majors.  Somewhat encouraging, retail sales data for the month of August showed that the US consumer, although reluctant, is still spending in the worldâ�,��"�s largest economy.  Rising by 0.2 percent on the monthly comparison, the actual figure trumped the consensus decline of 0.2 percent and continued the positive vibe following the 1.4 percent rise in July.  However, somewhat conversely discouraging is the fact that the core figures, excluding the volatile auto component, fell below the 0.3 percent consensus figure as the prior monthâ�,��"�s number was revised lower.  This little tidbit is likely to add to growing dollar bearishness as greenback enthusiasts are combing desperately to find one piece of economic data that may turn the current end to monetary tightening.  At this point, it seems only that employment prospects may be giving the particular indication.  Initial jobless claims on the day rose less than expected and has been for the past five weeks.  Subsequently, the decline has brought the four week moving average lower, adding to sustained employment growth speculation and will likely keep hopes high for another in-line figure when the first Friday of the month rolls around.  Separately, Fed Governor Susan Bies spoke on Thursday as she defended recent risk management proposals for commercial real estate investment.

Euro
The euro was bid on the session following hawkish comments issued by European Central Bank President Jean Claude Trichet, reinforcing the hawkish bias by policy makers.  In an interview with Italyâ�,��"�s Lâ�,��"�Espresso magazine, Trichet reiterated his previous pledge to act in accordance with â�,��"strong vigilanceâ�,� to curb inflation noting the importance of intervening before â�,��"these effects materializedâ�,�.  Remaining within the pledge for more transparency, the comments were a clear suggestion that policy makers will indeed follow the recent trend of rate increases as we approach year end.  The central bank has raised benchmark rates four times already since last December in order to remain preemptive on inflationary pressures built by the recent rise in commodities.  In addition, other factors on the economy have lent strength to the notion including rising exports and hopeful consumer consumption in the face of increasing unemployment.  In the overnight, Euro Zone labor costs rose more than expected.  Consensus estimates had the figure rising 2.3 percent, a follow-up to the 2.2 percent seen in the previous month.  However, the figure continued to surprise, posting a 2.4 percent increase. Although not comparatively higher against US labor costs, the figure is reflective of inflationary pressures as they coincide with higher consumer price estimates of 2.5 percent.  Ultimately, with the US tightening campaign likely to end, the renewed tightening taking place in the Euro zone should definitely feed proponents of the 12-nation currency.

British Pound
Sterling prospects continued to be buoyed in the North American session as key data pointed to further expansion in Europeâ�,��"�s second largest economy.  In the overnight, retail sales rose positively in line with consensus estimates.  The surprising part was that the annualized figure popped higher by 4.3 percent, above the consensus estimate of a 4.1 percent rise.  Not only did the report bounce back from the monthly decline seen in July, but it also rose above the 4 percent seen in the prior month as the figure was revised higher.  Now with consumers visibly back in full force, central bankers will likely consider another rate hike at the end of the year, boosting the return on pound based assets as well as the underlying currency.  Subsequent housing data reinforced the sentiment as the RICS house price balance continued the current strand of optimism set by both the Nationwide and HBOS reports.  For the month, the survey ended higher printing a 35 percent versus earlier estimates of a 32 percent rise.  Either way, policy makersâ�,��"� prayers over consumer weakness have been answered as previous pessimism has likely abated on house price stability and rising economic prospects.  Bullish for the underlying currency, traders will likely want to see a simultaneous uptick in next weekâ�,��"�s CBI industrial trends survey.  Although sustained, manufacturing weakness may call into question the rosy picture that has been witnessed in the UK economy.

Japanese Yen
Japanese data was light on the session with a handful of reports that were relatively disregarded by the masses.  For the record, machine tool orders for the moth of August rose 4.8 percent, better than expected and bankruptcies climbed at a 1.5 percent pace.  Taking the bulk of the focus today, however, was the Reuters Tankan survey.  A monthly survey of leading indicators, the report suggested that even more dire straits are expected for the worldâ�,��"�s second largest economy.  With retail sales figures and industrial production reports taking a hit, the market surveyor can add to the list corporate pessimism.  According to the diffusion index of manufacturing firms for September, business confidence among firms worsened in the month compared to the three months prior.  Subsequently, companies feeling the costs of higher raw material prices took the survey down by 9 whole points.  Smaller in scale, the report is well suggestive that markets may be in for a lower than expected headline Tankan released by the Bank of Japan next month, feeding yen bearishness.  However, interestingly enough, the results counter the capital expenditures report earlier in the month that showed continued investment by firms on rising expectations of increased demand in the short term.  This fact alone will likely keep parties waiting for the central bank report before furthering their directional assessment.

Kathy Lien is the Chief Currency Strategist at FXCM.