Dollar Slides After Current Account Deficit Hits a Record High (page 2 of 2)

Starting tomorrow, we are expecting a lot of UK data including the minutes from the most recent monetary policy meeting, housing market figures and GDP. All of it should continue to be more positive than negative for the British pound. The only problem is that according to the IMM futures data, long British pound positions have hit extreme levels as of early last week. This means that the number of buyers left in the market may be limited.

Japanese Yen - The Japanese Yen strengthened against every major currency except for the Euro today as stability returns to the region with North Korea resuming six nation talks in Beijing to see if they would be willing to dismantle their nuclear program. The Bank of Japan is set to announce their monetary policy decision tonight. Interest rates are expected to be left unchanged at 0.25 percent, putting the market's main focus on BoJ Governor Fukui's post meeting comments as well as the central bank's monthly report. Hawkish comments could help the currency extend its rally as the market prices in the possibility of a Q1 interest rate hike by the central bank. The recent weakness of the currency should help pave way for stronger growth and give the government more confidence that the Japanese economy could handle another rate hike.

Commodity Currencies (CAD, AUD, NZD) - The commodity currencies behaved very differently today with the Australian dollar weakening, the Canadian dollar strengthening and the New Zealand dollar remaining mostly unchanged. Starting with Australia, home sales dropped 5.3 percent in the month of November with sales of private detached homes plummeting to the lowest level since December 2000. Leading indicators are due for release tonight along with job vacancies. Given the recent trend of data, we could see more Aussie negative news. Canada reported a surprisingly strong rise in leading indicators during the month of November, with eight out of the ten components improving, which helped to rally the currency. Traders completely shrugged off the weaker International Securities Transactions which suggested that foreigners were pulling money out of Canada. Inflation data is due for release tomorrow with a rebound expected thanks to a recovery in oil prices and a prior drop in October. New Zealand business confidence improved in the month of December, but the key will be tomorrow's half-year economic and fiscal update along with the Budget Policy Statement.