The dollar has fallen the most against the euro in two weeks. U.S. consumer confidence dropped to a five-year low and the housing slump deepened.
While house prices continue to decline, mortgage difficulties will certainly persist and could easily intensify.
The Federal Reserve has denied that it will buy mortgage-backed securities directly, but there will be further expectations of action to boost the mortgage sector and improve liquidity.

The stronger existing home sales report has certainly contributed to the dollar’s brief recovery with the sale of previously owned homes rising by 2.9 percent, ending a six month streak of negative home sales. However house prices have now dropped 11% year on year. The dollars rally could come to an end this afternoon as consumer confidence is at a five year low.

After the trouble with Bear Stearns, JP Morgan has put in a higher offer purchase price, which improved overall risk appetite.
Also there will be further speculation over potential G7 action to subsidise currencies through joint intervention.

Sterling might make a small amount of headway against the dollar this week, moving back above $2, but with concerns about the UK economy, it is unlikely to stay