Is the Euro Overvalued? (page 2 of 2)

The most undervalued currency is Chinese Yuan at 58%.

Meanwhile the Swiss Franc received no help from the stronger than expected trade balance. The country's trade surplus hit a record last month due largely to declining imports.

Will the Bank of England minutes crush the British Pound?

The minutes from the most recent Bank of England monetary policy meeting are due for release tomorrow and the big question for the British pound is whether or not the central bank has grown more dovish.

The central bank left interest unchanged earlier this month but economic data and recent comments from BoE officials suggest that more members could have favored a rate cut.

Back in June, Blanchflower was the only MPC member to vote for a 25bp cut and he is likely to have done the same this month, especially after his comment yesterday that the UK economy is headed for a recession.

Chancellor Darling also feels that the fallout from the global credit crunch is proving worse than expected.

Canadian, Australian and New Zealand Dollars come under selling pressure

The Canadian, Australia and New Zealand dollars have come under selling pressure on the combination of weaker commodity prices and disappointing economic data.

Retail sales in Canada fell short of expectations despite the stronger wholesale numbers reported earlier this month.

Consumer spending rose 0.4% as consumers cut back on clothing purchases to compensate for spending more on gasoline.

Confidence fell to the lowest level in 13 years last month and it is now clear that this pessimism has also affected their spending habits.

Canadian and Australian consumer prices are due for release over the next 24 hours - softer numbers could send the commodity currencies even lower.

USD/JPY continues to track US equities

Yesterday, there was a high profile article in the Wall Street Journal that talked about how correlations across financial markets are beginning to break.

One of the correlations mentioned was USD/JPY and the S&P500. For the past 24 hours, it appears that the correlation is still holding as the rally in stocks drives USD/JPY above 107.

We continue to believe that oil and stocks will be the primary driver of the FX market this week.

Japanese economic data was surprisingly strong with convenience and supermarket store sales beating expectations.

However despite this improvement, the Japanese economy still faces more downside than upside risks.