Weekend gaps on most dollar pairs seem to have been filled at the moment, except for the large one on EUR/USD. Risk is off in the markets at the moment as equities have been sliding and higher-yielding assets are selling off, suggesting a potential safe-haven dollar rally. There are no major reports due from the U.S. today as only building permits and housing starts data are due during the U.S. session. Building permits could climb from 0.90 million to 0.93 million while housing starts are projected to rise from 0.89 million to 0.92 million in February.
The recent bailout in Cyprus is wreaking havoc in the financial markets as traders started to get jitters about a comeback of the euro zone debt crisis. Although Cyprus is just a small country in the region, contagion is still possible to other banks in the area. As for economic releases, the German ZEW economic expectations and overall euro zone ZEW economic expectations data are due during the London session today. The German ZEW could dip from 48.2 to 47.9 for the current month while the euro zone figure is expected to climb from 42.4 to 43.7. Weaker than expected results could trigger a sharper euro selloff.
The pound was able to take advantage of the short squeeze that took place late last week but GBP/USD and GBP/JPY are currently consolidating as traders await the release of the U.K. CPI and the BOE inflation report. Consumer prices are projected to be up by 2.8% on an annual basis, higher than the previous reading of 2.7% but still within the central bank's target. In case the actual figure moves out of the government's target, the BOE will have to submit an Inflation Letter to the Chancellor explaining why it happened and what the central bank plans to do.
There are no reports due from Switzerland today but the Swiss franc is being closely watched by European traders seeking a safer currency. The gap on USD/CHF hasn't been filled yet, which suggests a potential selloff for the pair at least back to the .9400 major psychological support level.
USD/JPY found support at the 94.00 previous resistance level and appears ready to test its recent highs around 96.75. There are no major reports due from Japan today or tomorrow as Japanese banks will be off on a holiday. EUR/JPY's weekend gap still hasn't been filled as the pair hasn't reached the 124.50 minor psychological resistance yet.
Commodity Currencies (AUD, CAD, NZD): Neutral
Canadian wholesale sales and manufacturing sales are scheduled for release during the New York session and these reports could provide enough volatility for USD/CAD. Both reports are expected to print rebounds for January, as manufacturing sales could increase by 0.7% while wholesale sales might rise by 0.4%, suggesting a recovery in consumer spending later on. As for the Australian dollar, the RBA just released the minutes of their latest monetary policy meeting and noted that the economy has shown positive signs lately. No economic reports are due from New Zealand.