Overall, the dollar continued to strengthen into the European session, ahead of the two very important interest rate meetings. The euro fell during the overnight session, but the pound traded somewhat cautious. The market expects both banks to cut 50 basis points, down to 1.50% for the ECB and to 0.50% for the BoE. Shortly after, the market will shift its focus towards Mr. Trichet’s speech, which, as usual will create volatility into the currency market.

The Euro (Eur/Usd) fell at the start of the Asian session near the neutral pivot point (1.2590), but moved sideways until the pair moved lower after the London open. Until now, the euro has declined 90 pips, paring most of the gains from the last day of trading.

The Euro-area GDP release showed that the economy contracted in the fourth quarter 1.5%. Q4 was the third consecutive quarter in which the economy contracted. Compared with the fourth quarter of 2007, the Euro-area GDP fell by 1.3%. Taken individually, the biggest economies from the Euro-area declined at a record pace in the last quarter.

The Pound (Gbp/Usd) traded mixed in the overnight session. The pair struggled to break above the high of the last day of trading in the European session, but could not manage to do so. During the Asian session, the pound tested the neutral pivot point (1.4125) a couple of times, but, again, was not able to break it.

In February, house prices continued to tumble in the U.K. by 2.3%, offsetting the gain seen in the month before. From one year ago, U.K. house prices have fallen by 17.7%, down to the same level as in 2004, while the price of an average house is now £160,327

The Aussie (Aud/Usd) fell 65 pips in the Asian session, down to the neutral pivot point (0.6430), but could not move any lower. Yesterday, the aussie failed another test of the 20-day simple moving average, which has seemed unbreakable in the last month of trading.

Australia has posted a lower than expected trade balance for the month of January. In seasonally adjusted terms, the surplus was A$0.97 billion; this is a decrease from December’s A$0.42 billion which was also revised lower, from A$0.59 billion. The building approvals from Australia fell a seasonally adjusted 3.7 percent, month over month, in January. This was against expectations for the relatively small increase of 1.4 percent. The trend estimate for total dwellings approved has fallen 4.3 percent for the 14th consecutive month in January

The Cad (Usd/Cad) retraced some of the declines seen in the last day of trading, during the overnight session. The cad traded tonight on very light volume, but managed to advance 60 pips, up to the neutral pivot point (1.2800). Earlier this week, the Bank of Canada reduced the key lending rate by 50 basis points.

The Swissy (Usd/Chf) gained 90 pips since the new trading day started, and pared the decline seen just one day earlier. In the early part of the Asian session, the pair bounced off the 20-day simple moving average, an important swing area that has formed in the last few days.

Yen (Usd/Yen) struggled to break above the 99.50 area in the overnight session. Yesterday, the pair also topped around this area and could not manage to break anywhere higher. If it does break higher, the yen will have to test the 200-day moving average as the next resistance level.

Capital spending in Japan has fallen by 17.3 percent during the fourth quarter of 2008. This is a steeper drop than the 15.6 percent decrease which was expected by economists. Spending was cut in the last quarter at the fastest pace in the past ten years. This was caused by exports crashing to a halt as manufacturers earnings evaporated. This report is expected to be used to revise the GDP statement