US Dollar
The markets saw more economic data to purport the current sentiment that interest rates are likely to remain at the current 5.25 percent for the rest of the year, driving mixed results on the session.  For the record, producer prices were released tepidly as the headline figure came in well below the consensus estimates.  Even more disconcerting was the monthly decline in the core figure.  Excluding the volatile energy and food components, prices surprisingly declined by 0.4 percent in the month of August.  As a result, the headline annualized figure was lowered to 3.7 percent with the monthly comparison dipping to 0.9 percent from the 1.3 percent seen in the month prior.  Indicative of a confirmed slowdown as commodity prices have pulled back in the past couple of months, the report now serves the â�,��"nail in the coffinâ�,� scenario, all but ensuring that Federal Reserve officials will issue a no-decision come tomorrowâ�,��"�s announcement.  Speculation has even gone as far as placing bets that policy makers will likely not make a rate hike decision for the rest of the year, with some even contemplating a potential rate cut, yes a cut, in the coming new year.  Bolstering this notion was a subsequent housing report released in time with the producer price report.  According to the Commerce Department, the annual rate of housing starts dropped to a 1.665 million rate compared to the 1.772 million pace seen in the previous month.  Building permits additionally dropped to the lowest level in four years and fully confirms the underlying decline in demand.  Instead of a slow supply situation, much like in Australia, US homebuilders have noted a considerable dip in demand overall, leading to less and less projected figures.  As a result, concern is building far past the lower than expected release as consumer demand is likely to weaken on the approach to the quarter end.  The notion will likely keep the word â�,��"recessionâ�,� on the lips of every market participant, while placing plenty of bearish weight on the underlying greenback.  Separately, dollar buying was seen wrapping up the session following a widely covered military coup in Thailand.  With the country in political turmoil as the masses continue to seek a resignation from the incumbent Prime Minister, a vote of no confidence has been placed in bidding up dollars.  Considered a more stabilized currency, the dollar rose on demand against short sellers of the Thailand domestic Baht.

Euro
What a travesty.  Leading the euro and European based assets lower on the day was a plunging economic sentiment survey released by the Mannheim based ZEW think tank.  According to the survey based on 307 analysts and institutional investors, sentiment weakened overall for the economy.  For the record, the actual reading plunged to a negative 22.2 print from the previous minus 5.6 figure.  Although some call into question the reliability of the actual report, there still remains some validity in the reading as reflective of the lack in consumer demand and high rates of employment.  More damaging is the fact that recent central bank hawkishness is likely to come into questioning as the lower reading is likely to spark the interest of policy officials.  However, overall members may continue to move ahead hawkishly as figures continue to purport further rate tightening necessity in the near term rather than the prescribed longer 6 month forecast of the ZEW survey.  Even the current sentiment component backed recently positive figures, rising to a 38.9 print from the previous monthâ�,��"�s 33.6.  Additionally supportive evidence even preceded the announcement as the producer prices report retained a 5.9 percent increase on the month, following a 6 percent seen in the month of July.  Coupled with the current rate of export growth and central bankers are likely to side with at least one rate hike in the short term, with most of the market wildly speculating a 3.5 percent rate by yearâ�,��"�s end.

British Pound
Dollar weakness spurred the pound sterling slightly on the day with no economic data across the Atlantic to support the underlying currency otherwise.  Taking into consideration of todayâ�,��"�s move, further momentum is likely to follow on rising hawkishness from tomorrowâ�,��"�s release of the Bank of England minutes and the CBI industrial trends survey on Thursday.  With futures contracts already pricing in a 100 percent probability of another 25 basis point rate increase, the minutes will likely add to price action and a potential move towards the 1.8900 figure.  Expected for tomorrow will be rhetoric or clear concern over the continually rising rate of consumer prices by central bankers, definitively on the side of rate hike in the month of November.  However, should any dovishness or concern be placed over the countryâ�,��"�s individual consumption rate, markets will likely wait to see any conflicting or confirming notions from the subsequent CBI industrial trends survey.  The CBI report will continue to boost the support witnessed in the manufacturing sector, bolstering the aforementioned hawkish bias as it maintains expansion Europeâ�,��"�s second largest economy.  Coincidentally, the report would additionally support an earlier report released by the Confederation of British Industry that showed the fastest pace of growth in retail sales in almost 2 years.

Japanese Yen
What Japanese economic data there was released on a thin night, wasnâ�,��"�t good.  Consumer demand was once again visibly weak in the month of August as both Tokyo Department and Nationwide Department sales fell in the month.  Adjusted for same store basis, the more pertinent Nationwide figures dipped 0.9 percent on the year on year comparison, the fifth straight consecutive decline, as Tokyo department sales fell 1.6 percent.  The inactivity brought revenue in stores opened within the past year down by 0.4 percent, continuing to perpetuate the ill effects of consumer hesitance in the worldâ�,��"�s second largest economy.  As a result, the probability of a rate increase in the short term has become smaller and smaller, even if consumer prices are no the rise.  With weak economic growth prospects, aside from increased business investment and a support export market, there may not be much evidence for central bankers to easily side with another 25 basis points in the next quarter.  Nonetheless, hope still resides with a rate increase on expansion next year, spurring an inkling of yen demand in a sea of short contracts.

Kathy Lien is the Chief Currency Strategist at FXCM