US Dollar
The greenback had plenty to be woeful about on the opening of the new week as both current account and net foreign securities purchase reports painted a rather pessimistic picture.  First up, released in the New York morning was the current account balance for the second quarter.  Expected to widen slightly to a $214 billion shortfall, the Commerce Department report beat expectations as the deficit increased to the second highest deficit on record, a whopping $218.4 billion shortfall.  Even worse was the fact that the previous monthâ�,��"�s figure was revised higher from a $209 billion deficit to a $213 billion deficit.  A potential sign of worsening times in the worldâ�,��"�s largest economy, the figure further indicated foreign interests were paid larger sums of interest income, increasing the shortfall.  More money flowing out then coming in, dollar bearish.  Adding to the sentiment was the net foreign securities purchases report or TIC data for the month of July.  According to the report, foreign interest in US based assets increased only incrementally as a result of the likelihood that the Federal Reserve will halt their recent monetary tightening policy.  The figure was far below the consensus of a $70 billion interest and is likely to continually weigh on the greenback in the short term.  Now, more than ever, the dip poses a definitive problem for the US as the current pace of the deficit requires at least $2.4 billion in funding in order to compensate for the shortfall that is approaching $850 billion for the year.   Subsequently, the report results additionally confirm futures trading bets that are pricing in a next to nil probability of a rate hike or hawkish rhetoric at this weekâ�,��"�s Federal Reserve meeting.  Unless upcoming reports improve, current price action may only be stalling before an imminent end to the dollarâ�,��"�s positive journey.

Euro
Euro-centric data was overshadowed by the dollar weakness on the day, and rightfully so considering there was only one piece of data for the market to ponder.  For the month of July, Eurozone industrial production surprisingly declined by 0.4 percent.  The consensus had expected a 0.2 percent increase for the month.  Subsequently, the decline purported a move lower in the annualized figure, bringing the previously printed 4.4 percent figure down to 3.2 percent.  However, it seems as though the overall figure may have been misleading as the decline was notably attributed to slowdowns in output by France and Italy.  These dips outweighed continued productivity in the German economy and may have overstated the pessimism, at least in the interim, according to the EU Statistics office Eurostat.  The German economy for the month continued to a rising pace, marking 1.1 percent on the month on month figure for July.  As a result, there is still ample evidence to boost comments in the overnight by European Central Bank Executive Board member Jose Manuel Gonzalez-Paramo.  According to the policy maker, the central bank would be ill advised and fooled into thinking that inflationary pressures have abated on the recent decline in the crude oil prices.  As a result, he told reporters in Singapore that â�,��"we are strongly vigilant on the risks to price stabilityâ�,�.  The comments coincided with earlier sources from the central bank that upgraded the possibility of a series of rate increases into 2007, keeping the euro bid at the moment.

British Pound
Rightmove housing prices continued to head in the sterling bullish direction as the report printed a month on month increase in housing prices.  Trumping the 1.6 percent decline witnessed in the prior month, the report showed a 0.2 percent uptick in the month of September, bringing the overall annualized figure to a whopping 9.8 percent pace.  Reiterating the theme that has persisted over the past quarter, the report continued to put forth a stabilized picture for the housing sector.  The report results also assist in pricing in 100 percent likelihood that the Bank of England will raise rates by December of this year in order to combat inflationary pressures that are looming over the economy.  With consumer demand seemingly on the rebound and manufacturing supported, housing sector stability is likely to lead to further expansion domestically.  However, what may trump this all too perfect picture is this weekâ�,��"�s release of the Bank of England minutes.  Although likely to remain hawkish and in favor of the 4.75 percent benchmark rate, any hint of dovishness may spark some latent hesitance.  Although possible, economic evidence remains all too powerful at this point and will likely contribute to further bidding on dollar weakness, albeit in the short term.

Japanese Yen
Data was non-existent in the overnight, but that didnâ�,��"�t stop traders from taking the major currency for a ride in the session.  Hanging over the Japanese yen was this past weekendâ�,��"�s G7 conference.  Although expected to touch on the topic of Asian currency strength and a more flexible Chinese yuan band, the meeting did neither, only noting that both existed.  The notion lent to some yen shorting as some in the market had anticipated comments to be in favor yen strength, only to be surprised by the currency testing highs against the greenback at the 118 figure.  Looking ahead, further event risk is likely to weigh on the Asian denomination as we approach the LDP elections, set for September 20.  With a more than likely victory laying at the fee of Shinzo Abe, the chief cabinet secretary, traders will more than not focus on his stance and ultimate relationship with the Bank of Japan.  Here, the question remains as in any new high level positioning, will he back reform led by the incumbent Koizumi.  The answer will likely mean life or death for a recently range bound currency.

Kathy Lien is the Chief Currency Strategist at FXCM.