Fundamental Outlook at 1500 \t\tGMT (EDT + 0500)<\/span><\/strong><\/p>\n \u20ac<\/strong><\/p>\n The euro depreciated vis-\u00e0-vis the U.S. \t\tdollar today<\/strong> as the single currency tested bids around the US$ \t\t1.4365 level and was capped around the $1.4510 level. \u00a0The common \t\tcurrency was pressured overnight on rumours that German Chancellor \t\tMerkel may resign following a media report that she was losing the \t\tsupport of her coalition partners.\u00a0 Merkel dismissed this talk as \t\t\u201cabsurd\u201d and pledged to move forward with her pledge to reduce taxes.\u00a0 \t\tData released in the eurozone saw the November trade surplus print at \t\t\u20ac4.8 billion, down from \u20ac6.6 billion in October, while EMU-16 consumer \t\tprice inflation rose 0.3% m\/m and 0.9% y\/y.\u00a0 The common currency has \t\talso been pressured this week following ongoing concerns that Greece\u2019s \t\tfiscal position may require drastic intervention from the European \t\tUnion.\u00a0 European Central Bank President spoke after the ECB\u2019s decision \t\tto keep rates unchanged yesterday and provided a mixed assessment of the \t\teurozone economy.\u00a0 Trichet also talked up the U.S. dollar, an ongoing \t\tdialog he has had with the market that is designed to limit the amount \t\tof upside potential for euro appreciation.\u00a0 In U.S. news<\/strong>, data \t\treleased today saw December consumer price inflation up a \t\tsmaller-than-expected +0.1% m\/m and 2.8% y\/y at the headline level and \t\t0.1% m\/m and 1.8% y\/y at the core level.\u00a0 Also, the January Empire State \t\tmanufacturing index improved to 15.92 from a revised prior reading of \t\t4.50.\u00a0 Additionally, December industrial production printed at 0.6% and \t\tcapacity utilization improved to 72.8%.\u00a0 Finally, the mid-January \t\tUniversity of Michigan consumer sentiment index receded to 72.8 from the \t\tprior reading of 72.5.\u00a0 \u00a0Data to be released on Tuesday include net \t\tlong-term TIC flows and the NAHB housing market index.\u00a0 Most Federal \t\tReserve officials \u2013 but not all \u2013 have talked up the U.S. economy\u2019s \t\trecent strengthening and Fed officials are said to be reviewing ways to \t\tdrain upwards of US$ 1 trillion in excess cash from the financial \t\tsystem.\u00a0 Euro bids are cited around the US$ 1.3885 level.<\/p>\n \u00a5\/ CNY<\/strong><\/p>\n The yen appreciated \t\tvis-\u00e0-vis the U.S. dollar today<\/strong> as the greenback tested bids around \t\tthe \u00a590.60 level and was capped around the \u00a591.30 level. \u00a0Bank of Japan \t\tChief Economist Momma reported \u201cthe pace of Japan\u2019s economic growth may \t\tslow temporarily because of decreasing public works spending\u2026but \t\toverall, the Japanese economy is likely to continue to pick up.\u00a0 Momma \t\tsaid the rate of deflation will ease in one to two years because \u201cthe \t\thuge output gap has to be erased.\u201d\u00a0 This week, finance minister Kan \t\treported Bank of Japan can enact more measures to ease monetary policy \t\tand it is likely the government will increase pressure on the central \t\tbank to expand monetary policy further.\u00a0 New finance minister Kan \t\treported he plans to address the yuan at the Group of Seven meeting in \t\tFebruary and indicated \u201cthere are still various policy measures that \t\tcould be taken\u201d by Bank of Japan to relax monetary conditions further.\u00a0 \t\tThe Nikkei 225 stock index gained 0.68% to close at \u00a510,982.10.\u00a0 U.S. \t\tdollar offers are cited around the \u00a594.75 level.\u00a0 The euro moved \t\tlower <\/strong>vis-\u00e0-vis the yen as the single currency tested bids around \t\tthe \u00a5130.30 level and was capped around the \u00a5132.40 level.\u00a0 The \t\tBritish pound moved lower <\/strong>vis-\u00e0-vis the yen as sterling tested bids \t\taround the \u00a5147.40 level while the Swiss franc moved lower <\/strong> vis-\u00e0-vis the yen and tested bids around the \u00a588.20 level. In Chinese \t\tnews<\/strong>, the U.S. dollar appreciated vis-\u00e0-vis the Chinese yuan as the \t\tgreenback closed at CNY 6.8269 in the over-the-counter market, down from \t\tCNY 6.8272. \u00a0Data released in China overnight confirmed China\u2019s foreign \t\treserves raced higher to a new record level in December, up 23% to US$ \t\t2.4 trillion.\u00a0 At the same time, banks provided CNY 379.8 billion in new \t\tloans, lifting the 2009 total to a record CNY 9.59 trillion.\u00a0 This huge \t\tgrowth in loan demand evidences the risk of additional overheating in \t\tthe Chinese economy and the pressure People\u2019s Bank of China faces to \t\trestrict additional monetary growth this year.\u00a0 PBoC this week decided \t\tto lift reserve requirements at commercial banks by 50bps from 15.50% to \t\t16.00%, effective from 18 January.\u00a0 China Investment Corporation \t\texecutive Peng moved the markets this week when he said \u201cI \t\tthink the dollar is at its bottom now. There will be very limited space \t\tfor the dollar to drop further.\u00a0 The yen is what, I think, has the worst \t\toutlook. The yen will continue to drop, unlike the dollar, which will \t\tnot serve for long as a source of funding carry trades.”<\/p>\n \u20a4<\/strong><\/p>\n The British pound depreciated vis-\u00e0-vis \t\tthe U.S. dollar today<\/strong> as cable tested bids around the US$ 1.6270 \t\tlevel and was capped around the $1.6355 level. \u00a0Data released in the \t\tU.K. today saw the November leading indicator index decline 0.9%.\u00a0 Bank \t\tof England Monetary Policy Committee member this Posen called for \t\tadditional business lending while MPC member Barker said she does not \t\texpect the economy to gather steam in the first six months of the year. \t\t\u00a0Barker also indicated she sees first half growth prospects as \u201cpatchy.\u201d \t\t\u00a0MPC member Sentance moved the markets this week when he said \u201cAt some \t\tpoint you have to say we have increased the amount of stimulus enough.\u00a0 \t\tIt doesn’t mean you are going to withdraw it but you don’t have to keep \t\tadding to it.\u00a0 The Bank is approaching the point where we need to hold \t\tback and wait and see how that’s flowing into the recovery.\u201d\u00a0 Data \t\treleased in the U.K. this week saw November manufacturing production \t\tflat m\/m and off 5.4% y\/y while November industrial production was up \t\t0.4% m\/m and off 6% y\/y.\u00a0 Cable bids are cited around the US$ 1.5730 \t\tlevel. The euro lost ground<\/strong> vis-\u00e0-vis the British pound as the \t\tsingle currency tested bids around the \u20a40.8810 level and was capped \t\taround the \u20a40.8880 level.<\/p>\n CHF<\/strong><\/p>\n The Swiss franc depreciated vis-\u00e0-vis \t\tthe U.S. dollar today<\/strong> as the greenback tested offers around the CHF \t\t1.0285 level and was supported around the CHF 1.0180 level.\u00a0 Data \t\treleased in Switzerland today saw December producer price inflation up \t\t0.1% m\/m and decline 2.5% y\/y.\u00a0 The OECD today called on Switzerland to \t\tkeep interest rates unchanged until the economic recovery takes hold.\u00a0 \t\tU.S. dollar offers are cited around the CHF 1.0420 level.\u00a0 The euro \t\tmoved lower<\/strong> vis-\u00e0-vis the Swiss franc as the single currency tested \t\tbids around the CHF 1.4750 level while the British pound gained \t\tground<\/strong> vis-\u00e0-vis the Swiss franc and tested offers around the CHF \t\t1.6750 level.<\/p>\n