The USD lost steam from last week’s strengthening vs. most of the major currencies as investors continued to feed their risk appetite, leading the higher-yielding commodity currencies higher. The greenback also weakened amid renewed concerns that the Federal Reserve could still have to cut Interest Rates to boost growth. As a result, the USD dropped 0.2% on the day at 1.5513 vs. the EUR having earlier hiked above the 1.54 mark.

Yesterday’s speech by Chicago Fed President Evans lowered the growth prospects for the U.S. economy. In his speech he highlighted the growing weakness in household spending, and said that the economic growth will probably remain dawdling throughout 2008. The U.S. inflation prospects also remain quite gloomy. Economists expect it to fall within 1.5% to 2% by 2010.

Looking ahead to today, we have a batch of very important US data. With the many speeches to follow, the most important speech will be delivered by the Fed Chairman Bernanke. High volatility is expected during his speech as investors will attempt to decipher Interest Rate clues. Traders will also focus their attention today on the Core Retail Sales and the Retail Sales figures. These indices shall give a more accurate picture of the consumer spending, which is a major driver of the economy and has a sizable impact on GDP. Traders pay close attention to Retail Sales because it is usually the first significant indicator of the month that relates to consumer behavior and is susceptible to surprises.

Today traders may expect another volatile trading session for the U.S. currency as negative data can retain greenback’s bearish trend. Overall, we expect the greenback to remain consistent, as it could see small drops against its European counterpart.