Immediate sentiment improved in Europe on Monday and the US currency strengthened to highs just beyond 1.5850. The dollar was unable to sustain the gains as sentiment towards the US financial sector remained depressed. There were no significant US data releases on Monday, but there are a series of scheduled releases on Tuesday which will provide further important evidence on the US economic conditions with a particular focus on retail sales. The testimony from Fed Chairman Bernanke will also be watched very closely on Tuesday and could be extremely important for near-term market direction, especially in view of the increased financial-market stresses. If Bernanke concentrates on economic risks and dampens any prospect of higher interest rates then there would tend to be renewed dollar selling pressure. A robust stance on inflation would underpin the dollar and any comments on the US currency will also be watched very closely given speculation over the possibility of intervention to support the dollar. The German ZEW confidence index weakened to -63.9 in July from -52.4 which will reinforce Euro-zone fears and helped pull the Euro from record highs above 1.60. The German data will also increase pressure for measures to limit further Euro gains. | 
