US Dollar
The market is beginning to get tired of the US dollarââ,¬â"¢s extended sell-off as the Euro ends the day virtually unchanged along with the Japanese Yen and British pound.  The real action today was in the commodity currencies (see that section for more details).  For the most part, US economic data continues to disappoint, with the national ISM manufacturing index falling from 52.9 to 51.2, the lowest since June 2003.  The bigger surprise was the drop in the prices paid index to 47, which is the lowest since Feb 2002.  The manufacturing sector in the US is languishing and the numbers are showing it.  This follows earlier weakness in both the Philly Fed and Chicago PMI reports and is yet another piece of evidence that the US economy is slowing and inflation is abating.  Pending home sales and construction spending also printed lower than expected highlighting the weakness of the US housing market. Only a very strong non-farm payrolls report on Friday will help save the dollar, albeit most likely temporarily.  Todayââ,¬â"¢s ADP release suggests that a triple digit non-farm payrolls print on Friday may be possible.  According to the payroll provider, 128k jobs were added in the month of October, 20k more than the marketââ,¬â"¢s initial forecast.  The Hudson index also rose to 101.4 from 100.5. The late afternoon dollar rally may be attributed to just that.  Aside from factory orders tomorrow, the US calendar is relatively light, which means that everyone will be looking ahead to Fridayââ,¬â"¢s report. 

Euro and Swiss Franc
With no economic data released today as most of Europe was closed for All Saints Day holiday, trading in the Euro has been extraordinarily quiet.  Tomorrow is the ECB monetary policy meeting along with the release of manufacturing PMI reports from all around the Eurozone as well as Germany unemployment.  The European Central Bank is not expected to lift interest rates until December, but there remains a tiny chance that they could.  If they do surprise with an earlier than expected hike, we could see a new round of Euro strength.  The main focus tomorrow will be the comments from ECB President Trichet.  Although we all know with great certainty that the central bank is still concerned about inflation and is looking to raise interest rates, economic data is beginning to suggest that growth in the regionââ,¬â"¢s economy is starting to be impacted by the slower growth in the US.  Should there be any signs of a tamer outlook by the central banker, expect Euro bulls to react violently.  Meanwhile even though the Swiss economy remains fairly strong, Swiss economic data is also beginning to surprise to the downside.  Earlier this week, the KoF leading indicator fell to 2.0 from 2.19 and today, the manufacturing PMI survey dropped from 64.4 to 62.3.  Tomorrow we are expecting Swiss consumer prices for the month of October.  Even though the monthly rate of growth is expected to rise, the annualized pace is expected to slow from 0.8 percent to 0.7 percent, giving the central bank little capability to raise interest rates.

British Pound
Even though manufacturing sector PMI came in slightly below expectations in the month of October, it did little to stop the British pound from rallying for the sixth consecutive day in a row.  Late yesterday afternoon, the Governor of the Bank of England warned that the central bank is watching the level of money supply very closely.  If you recall, two days ago, the annualized pace of M4 money supply growth hit a 16 year high.  Higher money supply is typically seen as a sign of inflation, which means that Kingââ,¬â"¢s comments were hawkish and confirms the marketââ,¬â"¢s overall belief that the central bank will be lifting interest rates to 5 percent later this year.  There is nothing on the UK economic calendar tomorrow aside from a speech by Deputy Governor Lomax.  We are unlikely to hear anything new from her.  The last time we heard from Lomax was mid last month.  She took a slightly more dovish bent by saying that the economy was not roaring away and that certain economic activity indicators have ticked down.  She did however say that the central bank was very alert to any sign of pay growth.  The lack of data could lead to a retracement in the GBP/USD, as the currency pair is already beginning to show signs of exhaustion.  

Japanese Yen
The Japanese Yen has not done much over the past 24 hours, but after an extended period of strength, it gave back a small portion of its gains today.  There has been little reaction to North Koreaââ,¬â"¢s agreement to return to the nuclear negotiation table or the slide in oil prices. Perhaps the pair is reacting to the fact that new Prime Minister Abe wants to rewrite the countryââ,¬â"¢s constitution to allow Japan to have its own military.  There is also no data due for out for the remainder of the week which means that the Yen will most likely be at the whim of the other currencies.  There is a very large Treasury coupon payment due soon, which could be mildly positive for the Yen as investors repatriate their earnings. 

Commodity Currencies (CAD, AUD, NZD)
The biggest market movers were the commodity currencies today with the Canadian dollar leading the pack.  News that Canada will begin to tax income trusts has sent both the Canadian dollar and Canadian stocks significantly lower.  Previously, these trusts have benefited from a tax loophole and the closing of this loophole will likely have a negative impact on corporate earnings. This announcement came as a complete surprise which suggests that its impact on the markets could last a few more days. The Australian and New Zealand dollars have risen in sympathy even as Australian PMI dropped from 53.5 to 51.9 for the month of Oct.  This was primarily due to employment retracing back to more reasonable levels after hitting 18 month highs and production weakening.   Building approvals however were very strong; rising by 6.15 percent, highlighting the strength of the countryââ,¬â"¢s housing market.  Tonightââ,¬â"¢s retail sales and trade balance report should clear the air on how the Australian economy is doing.  The Aussie has banked seven straight days of gains over the past 2 weeks.  Should the numbers come out weak, expect profits to be taken. 

Kathy Lien is the Chief Currency Strategist at FXCM.