Previous session overview

On Monday, the yen advanced across the board at the expense of higher-yielding currencies as risk aversion and slumping equities reemerged as the dominant concerns for investors.

The Euro continued to come under pressure as the market focuses on Thursday's Rate Decision. Also weighing on the Euro was concern over Ireland and Greece Sovereign debt been put on rating watch by S&P.

The British pound has retraced more than 50 percent of the rally we saw last week, as lingering risk aversion weighs on some of the more volatile currencies.

Against the Japanese yen, despite trading narrowly in Asia as Tokyo market was closed for a Japanese holiday, the greenback tumbled to a 3-week low of 88.89 on active selling in EURJPY.

The Australian dollar was pulled sharply lower again Tuesday as Asian equity markets remained soft, commodity prices were weak and ratings agency Standard and Poor's warned regional neighbor New Zealand it could lose its AA-plus credit rating. The Australian dollar was quoted at USD0.6779, down from USD0.6910 late Monday, its lowest levels since Dec. 17. Against the Japanese yen, it was quoted at JPY60.385, down from JPY62.265 Monday.

Market expectation

The euro is mixed Tuesday, and the European Central Bank needs to cut rates aggressively Thursday to deter the market's opinion that it may be behind the curve. The euro is likely to continue suffering from expectations that the worst has yet to come for European economies.

A relief rally to USD1.3290 met with renewed sell interest, early European dealing then seeing fresh lows for the day under USD1.3230. Technical analysts now seeing support from the 55-day moving average at USD1.3217, with light bids reported into USD1.3200 and further stop interest below. Little then seen on the order boards ahead of bids at USD1.3100/1.3080.

With sterling-yen under pressure and the greenback extending gains, cable dipped to fresh lows late in the day around USD1.4711, with early European dealing now extending the move to a USD1.46 handle as euro-sterling rallies to stg0.9047. Light bids at USD1.4650 now under pressure, said to be stronger into USD1.4600, with liquidity still said to be poor. Technical analysts see next support at USD1.4606 (76.4% Dec-Jan rally).

Investors are expecting the European Central Bank to cut key interest rates by 50 basis points to 2.0 percent this coming Thursday and according to interest rate futures on Monday, more people are betting for a 75 basis points cut.

The Australian dollar is likely to remain under pressure especially if December employment data Thursday points to accelerating job losses and slowing economic growth, analysts said.

Economic Indicators Update

S&P