Daily Forex Report - USD extends losses as risk sentiment improves

• USD: Lower, UN calls for replacement of USD with a new global currency, risk sentiment improves
• JPY: Higher, Japanese government sees economy improving, rising unemployment clouds the outlook
• EUR: Higher, Trichet says economic indicators have been better than expected, global economy stabilizing
• GBP: Higher, industrial output rises above forecast, FTSE rallies to 11 month high
• CAD and AUD: AUD & CAD higher, Australia's business confidence rises, gold and crude prices surge

Overview
USD traded sharply lower Tuesday with the dollar index trading at its lowest level since September 2008. The USD was pressured by a confluence of factors which included a UN report calling for the replacement of the USD with a new global currency to protect emerging markets, improving risk sentiment as equity markets rallied to the year's high in Asia and emerging equity markets trade above pre-Leman highs and positive economic data from Australia, the UK and Germany. Australia's business confidence rose to a six-year high. UK manufacturing output rose more than three times than expected and German exports posted a strong rise in July. The USD was also pressured by a surge in crude prices and the price of gold trading above $1000 an ounce. The G-20 pledge to continue to support the financial markets and maintain expansionary monetary and fiscal policies until recovery is secured adds to today's USD sell off and commodity price rise. Economist Roubini says the USD will weaken and is at risk of a crash if deficits are not controlled and reduced. The trade looked beyond mixed economic data from Japan and Switzerland with Japan's service sector index falling in August and Swiss unemployment rising to a six-year high. Diversification out of USD will likely continue until the G-20 signal an exit strategy from fiscal and monetary policy stimulus and the US addresses it's fiscal outlook.

Today's US data:
Consumer credit will be released after this report is published expected at -4 bln.

Upcoming US data:
On September 10th initial jobless claims for week ending 09/05 will be released expected at 960k compared to 970k last month along with July trade balance expected at -27.5 bln compared to -27.1 bln last month. On September 11th August import prices will be released expected at 0.9% compared to -0.7% last month along with preliminary University of Michigan consumer sentiment expected 65.3 compared to 65.7 last month. July wholesale inventories and the Treasury budget for August will be released on September 11th as well. Wholesale inventories are expected to fall by 1% compared to -1.7 last month the Treasury budget is expected to -161.50 bln compared to -111.9 1bln last month.