• The USD and JPY are trading higher ahead of today's FOMC meeting as risk remains the main driver for FX trade, concern about tightening of monetary policy in China, threat of a downgrade of Japan's bond rating, escalating tensions between North and South Korea and disappointment in Portugal's latest budget plans sparked safe haven demand for USD, EUR was pressured by report of a decline in German CPI and a statement from Luxembourg's PM Juncker that the EUR is overvalued and divergences in the regions may threaten its cohesion, Junker's comments increase speculation about a possible threat of a breakup of European monetary Union, GBP traded higher supported by hawkish comments from the BOE's Sentance that it will be difficult for the BOE to keep inflation on target, Sentance' comments suggest that the BOE may be prepared to pause its asset purchase plan, GBP gains were limited by report of weak UK retail sales, commodity currencies trade lower pressured by concern about the global recovery
• Focus turns to today's release of US new home sales, FOMC policy decision and the State of the Union address
• North Korea fired artillery rounds into waters near South Korea
• Japan's December trade surplus narrows to ¥545.3bln, exports rose by 12.1% and imports declined by 5.5%, JPY higher
• Australia's Q4 CPI rose by 0.6%, Westpac leading index +7.6%, AUD lower
• UK CBI retail sales at -8 compared to +13 last month, BOE Sentence says tightening depends on strength of the recovery, GBP mixed
• German CPI declined by 0.4% compared to a 0.9% rise in December, the German government raised its 2010 growth forecast to 1.4% from 1.2%, ECB's Weber says interest rates are appropriate and the ECB may take steps to further normalize monetary policy as the economy improves, EUR lower
• President Obama is expected to propose a three year freeze on discretionary spending
• CBO forecasts a $1.35trln deficit for 2010 and expects muted growth in the next few years, says government finances on unsustainable path
• The IMF raised its global growth outlook for 2010 to 3.9% from 3.1% and to 4.3% for 2011 and expects commodity prices to rise supported by improving demand
• US equity markets set to open mixed, European equities 0.25% lower, Nikkei closed 73 points lower

Upcoming Events

• US - Wednesday, new home sales for December will be released expected at 370k compared to 355k last month, the FOMC concludes a two-day policy meeting and President Obama will give the State of the Union address Wednesday night
• CAN - Wednesday, no major data is due for release in Canada today

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