Existing home sales released yesterday align with expectations at 5.75M and only slightly below the previous value of 5.76M, there was only a slight reaction from the market because the value was already anticipated by investors. Despite a low release of Existing Home Sales and with the difficulties in the US housing market, New Home Sales rose last week substantially from 846K to 870K. We are getting mixed signals from the housing market this month as the New Home Sales release surprised on the upside while there was a fall in the decreasing Housing Starts and Building Permits figures. Today the data for US Consumer Confidence will be released with an expected value of 104.8, which is below the previous value of 112.6, this indicates a degrading of consumer confidence which can influence the USD negatively.

Today's FOMC Meeting minutes are critical as investors are trying to get hints on a possible interest rate cut by the Fed during the next meeting. Although the general consensus is that an interest rate cut can be expected to occur, the timing is unclear. The Fed might await further reactions to its discount rate cut and the liquidity injections to the financial sectors before cutting the interest rate. In the meanwhile the Fed acknowledged in its August 7th meeting minutes that "risks to growth have increased" and therefore the fragile economic growth along with persistent risk aversion in the markets could favor a rate cut already in September.

As there is a lot of uncertainty involved in the recent market developments, investors should look out for indications in the FOMC Meeting Minutes today to get a hint about future Fed monetary policy and the timing of an interest rate change.

Yesterday the president of the ECB spoke at the annual congress of the European Economic Association in Budapest about the decrease of productivity in the Euro Area and monetary policy. His speech elaborated reasons for the decline of factor productivity and its connection to interest rate changes. Decreased productivity growth in the Euro Zone could be an argument against an interest rate hike during the ECB's next meeting.

Today we will see the release of the German Ifo Business Climate Index as well as the German Ifo Business Expectations Index, both values are, with 105.5 and 100.2 respectively, expected to lie below their previous values of 106.4 and 101.8 and reflect the firm's slightly negative prospects for the next 6 month.

With talks yesterday about a possible sale of the Sachsen LB, which is the state bank of Saxony, another German bank became a victim of the US sub-prime crisis. The SachsenLB had billions of asset backed securities in its portfolio which are now about to default on the back of the US credit woes. The SachsenLB is privatized, in contrast to most other state banks which are state owned, and its securities were backed up by the banks owners; however the clear overexposure of the bank through risky investments called for more transparency of banks investments.

With only little market moving data this week, a downside outcome of today's German Ifo Index could depress the EUR's uptrend.

During the last days the market demonstrated the return of carry trades, where investors sell the JPY in order to buy higher yielding currencies. Carry trades won't be back to full speed immediately as risk aversion is still high, but their return could mean that we will see the weakening of the JPY against all major currencies in the near future.

In the Minutes of the Monetary Policy Meeting on July 11 and 12th, which were released today, the members of the committee acknowledged the substantial growth of Japans economy. Exports as well as business fixed investment increased, private consumption is on an uptrend and production increased due to rising domestic and external demand. The BoJ still wanted to monitor the development of various indicators and decided in a majority vote to leave the interest rate unchanged at 0.5% for the time being. With an expanding economy and increasing commodity prices, there might be support of an interest rate hike to 0.75% during the next BOJ Meeting on September 18-19. On the other hand the still unresolved problems in the US housing sector could prompt the BoJ to wait.

As for today it seems that the JPY will continue to range trade against the major currencies and movements will mostly be dependent on the developments in the US sub-prime crisis which is still very uncertain.