The greenback recovered slightly against the majors, pushing the euro back toward the 1.59-level after dropping to 1.5970 earlier in the session. Amid a dearth of US economic reports, markets digested the government’s plan to rescue Fannie Mae and Freddie Mac, which consists of opening the Fed’s discount window as well as a proposal to purchase their equity. The moves are intended to quell bourgeoning fears over the stability of the financial sector, especially following the failure over the weekend of regional bank IndyMac.

The US economic calendar picks up this week with the releases of several key reports including June retail sales, PPI, business inventories, CPI, TICS, industrial production, housing starts, building permits, and the Philadelphia Fed survey. The data this week are likely to bode poorly for the US economic outlook, with housing continuing to remain weak, inflation creeping higher, and the manufacturing sector softer. The minutes for the Fed’s June meeting, due out on Wednesday, will provide further insight into the deliberations that kept rates unchanged but offered a shift toward a more neutral stance.

by Korman Tam