The Dollar slid against the Euro on Thursday as tough inflation comments by a European Central Bank official and strong German business confidence data dashed hopes for a near-term interest rate cut in the euro zone. An improvement in investors' appetite for risk, following a sharp rebound in European stocks and gains in US equities, pushed down the Dollar versus high-yielding currencies such as the British pound and the Australian and Canadian dollars.
ECB governing council member Axel Weber said the Federal Reserve's surprise decision to cut its key overnight lending rate by 75bp to 3.50% on Tuesday had not shifted the ECB focus on euro zone inflation, dampening rising expectations that it too will have to cut rates soon.
On Thursday, EurUsd rose 0.98% at 1.4772. EurJpy rose 1.36% to 158.25. UsdJpy was up 0.41% at 107.19, after earlier slipping to 105.94 intraday low. UsdChf fell 0.32% to 1.0884. GbpUsd rose 1.08% at 1.9779, after hitting an intraday 1.9500 low. GbpJpy was up 1.47% to 211.97.
The euro was under selling pressure in recent weeks as signs emerged that weakness in the US economy was having a knock-on effect on the euro zone, fueling the argument for a rate cut by the ECB. Some of those concerns eased slightly on Thursday after the Ifo economic research institute reported that German corporate sentiment unexpectedly rose in January, bolstering policy-makers' assertion that the euro zone economy can withstand turmoil in financial markets. Euro zone rate futures, which were pricing in 75bp earlier this week, now price in about 40bp of easing this year. The ECB's benchmark rate is currently 4%.
The Australian dollar benefited from the improvement in risk appetite and a surge in the price of Gold by 2.33% at 913.65 an ounce. AudUsd rose 1.18% to 0.8829, while NzdUsd went up 0.48% to 0.7671. There was little reaction to a report showing that the pace of existing-home sales in the United States fell 2.2% in December to a slower-than-expected 4.89 Mio-unit annual rate.

actually today, we are going to have a very important, hot
indicator. At 7:00 a.m. New York time we will have Canadian Core CPI m/m.
I don't want to give signals but based on my own experience, 0.1 deviation
can move market well but to play safe, 0.2 deviation should be good enough.
If the CPI comes out higher BY 0.2 (so expectations + 0.2) (or even higher),
USD/CAD and EUR/CAD should go down by around 40 to 50 pips for USD/CAD and
even more for EUR/CAD. If the CPI comes out lower by 0.2 (expectations - 0.2)
or even lower, USD/CAD and EUR/CAD should go up around 40 to 50 pips
or more.

EurUsd Rebounded on yesterday 1.4366 low for a clear return over 1.4500 pivot point. Current trading range is set 1.4366 – 1.4922. Market traded as high as 1.4922 last week, in sight of 1.4967 resistance November high. Further strength might open the door up to 1.5000 key level. Yesterday 1.4366 low marks support. With 1.4500 as major pivot level, market might look down for 1.4280 next support after trendline support holding 1.4311 December low.

GbpUsd remains weak having dropped yesterday down to 1.9337 before recovering up to 1.9604. Further downtrend pressure might open the door toward 1.9105 (50% retracement of 1.7049 – 2.1162 advance). Longs will only lock within a return over 1.9800 short term Trendline and 2.0000 key level ahead 2.0100 resistance. Initial supports hold 1.9483 11th January low and 1.9337 yesterday low.

UsdJpy remains weak having tested 105.63 Monday low. In recent downtrend, pressure opened the way toward 106 support. Initial support holds 105.92 last week low ahead of 104.20 trendline support. Strong resistance holds 110.10 last week double top ahead of 111.92 early January high.

UsdChf Even with yesterday sharp drop below 1.1000, with 1.0970 at close, January downtrend seems to come to an end rebounding from 1.0838 last week low. Market might look for 1.1130 (38.2% of 1.1603 – 1.0838 decline). But further weakness below 1.1019 will reopen the way down to 1.0759 trendline low. Initial resistance holds 1.1123 yesterday high. Early January double top 1.1191 marks strong resistance.

Wednesday, January 23rd, 2008 (4:30 a.m. New York Time) UK
At 4:30 a.m. we are going to have UK GDP as well as BOE Minutes. Because M. King spoke today at 3.10 and said enough about inflation like it may be over 3%, a lot of people think they will not do an emergency cut, implying they are going to cut but not an emergency cut. This makes the Minutes a little less important than usually it is. However, if they vote 9-0 to hold the rates steady on January 10, that would be bullish for the British pound, and if they voted 5-4, then it would be weakening for the pound. We will also have the GDP indicator at the same time. Last time the BOE Minutes dominated; this time, I think, the GDP may be more important. However, you have to look at the whole picture and try to get a good sense what is going on. Even 0.1 trigger is significant on the advanced GDP out of the UK but to be safe due to BOE Minutes coming out at the same time, I would trade 0.2 trigger. If the GDP q/q comes out at 0.7% or higher, we should see GBP/USD going up by 40 to 50 pips (assuming there is no conflict with the BOE Minutes), and it if comes out at 0.3% or lower, that would be weakening the GBP/USD, and it should drop by 40 to 50 pips in the first hour (if there is no conflict).

Wednesday, January 23rd, 2008 (3:00 p.m. New York Time) NEW ZEALAND
At 3:00 p.m. we are going to have New Zealand Interest Rate statement. They are expected to keep the rates steady at 8.25%. If they cut the rates, you can sell NZD/USD and look for 50 to 70 pips price action. If the price drops a lot before the report, you may consider buying NZD/USD if there is no cut, and I would take quick 20 pips only. If they hike the rates, then of course you can buy NZD/USD, and expect 50 to 70 pips price action. The real potential is if they either hike or cut, no change can be tradable only if there is a big down move right before the report.