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US Dollar continues weakening trend

The Conference Board's Consumer Confidence Index fell to a new record low of 37.7 during the month of January from 38.6, missing expectations of a slight rise to 39.0, with an increasing number of consumers believing that business conditions were bad (versus good and normal).

Looking ahead today the Federal Open Market Committee (FOMC) is widely expected to leave the fed funds target range at 0.0 percent – 0.25 percent. Their following statement may have an impact on risk trends, and any news that is positive for the stock markets may be negative for the dollar, which has been trading solely as a safe-haven asset lately.

The Euro began the day with a rally after positive German IFO figures showing an improvement in economic outlook sentiment, while the measure gauging the business climate edged up to 83.0 from 82.6. Markets tested the 1.3300 level against the dollar but fell back on profit taking however four rate cuts by the European Central Bank since October and the announcement of a 50 billion euro stimulus plan by German Chancellor Angela Merkel, which was approved today, may be starting to have an impact.

Traders have also slashed ECB rate cut expectations in recent days, believing rates will be left unchanged in February and just 0.25% in easing over the next 12 months.

Sterling consolidated its 5 big figure gains from Monday increasing its gains in Europe as the relentless pressure on the pound began to ease, trading against the dollar with a low of 1.3932 and a high of 1.4239, against the euro the range was 1.0640 / 1.0780.

Australian Dollar could gain overnight on Australian CPI Figures and New Zealand Dollar faces RBNZ rate decision this evening. Australia's headline consumer price index is forecasted to have fallen 0.4 percent during the fourth quarter, bringing the annual rate down to 3.6 percent from 5.0 percent.

The quarterly contraction would be the first in two years and the sharpest drop in eleven years, and may also add to speculation that the Reserve Bank of Australia will cut rates aggressively during their next meeting on February 2.