Daily FX
Uptrend in Commodity Currencies Come to an End
Friday July 27, 4:42 pm ET
By Kathy Lien, Chief Strategist strategist@dailyfx.com

The trend of multi year highs in the commodity currencies have finally come to an end this week with the New Zealand, Australian and Canadian dollars suffering significant losses. The biggest losers in the currency market today were also the NZD and AUD. As warned by central bank Governor Bollard earlier this week, exporters are definitely beginning to feel the pain of a strong currency. Both imports and exports dropped significantly, turning the NZ trade surplus into a deficit.

Meanwhile there have been reports that model and momentum funds are aggressively selling the Aussie which means that they are no longer holding out the hope for a recovery in the high yielders and are instead either getting stopped out or initiating fresh short positions. Australia has retail sales next week which will be worth watching. Canada on the other hand has raw material and industrial product prices along with GDP and IVEY PMI. USD/CAD has bottomed out and we expect the bottom to hold.

Daily FX
Weak Housing Numbers Weight on British Pound
Friday July 27, 4:38 pm ET
By Kathy Lien, Chief Strategist strategist@dailyfx.com

Like the Euro, the British pound has sold off significantly today on the back of liquidation of high yielding assets as well as a broad dollar recovery. House price growth continues to be soft which could be concerning going into next week?s heavy economic calendar.

We are expecting more housing market reports as well as money supply, consumer confidence, distributive trades, manufacturing and service sector PMI. Overall the UK economy still remains healthy and the Bank of England could raise rates to 6 percent by the end of the year. The global markets just need to stabilize before these factors come into play once again.

Daily FX
EUR/CHF Sees Biggest Weekly Drop in 4 Months, EUR/USD Weakens on Dollar Strength
Friday July 27, 4:36 pm ET
By Kathy Lien, Chief Strategist strategist@dailyfx.com

Over the past 2 days, the Swiss franc has rallied significantly against the Euro as a direct result of the currency?s own safe haven status. The KoF report of leading indicators was stronger than expected which has also helped, but the move in the currency pair began on Thursday. In the week ahead, we have the UBS consumption indicator and PMI from Switzerland.

Both are expected to remain strong, illustrating the overall health of the economy. The Euro on the other hand has weakened for no other reason than dollar strength. There are a ton of PMI, unemployment and consumer spending reports due out next week, which could lead to some Euro drive action.

BEIJING (AP) -- For months, U.S. lawmakers have warned Treasury Secretary Henry Paulson that patience was wearing thin as his economic dialogue with China failed to produce breakthroughs on currency and other disputes.

Now, as he meets this week with Chinese leaders, Paulson faces new pressure in Congress, where legislators have proposed measures that would punish Beijing for manipulating its currency.

"The problem is, there is very little they can do in the immediate future that will make Congress happy," said Andy Rothman, a China strategist for investment bank CLSA.

Paulson is due to hold talks with President Hu Jintao and other officials on the "strategic economic dialogue" launched by the two governments last year to deal with tensions over China's swollen trade surplus and other issues. The secretary also is to meet with Vice Premier Wu Yi, who leads the Chinese side of the dialogue.

But Paulson's real target audience is as much Congress as Beijing.

"Paulson is going to be hoping to come back from the current trip with private whisperings and confidences that he can