The dollar reversed some of its gains in trading last night and this morning, as markets compensated for dollar strength since the beginning of the year. Since domestic trading closed yesterday, the dollar fell 2.2% and 3.5% versus the euro and pound sterling, respectively.

Markets have priced in at least a 25bp cut from the European Central Bank on January 15th. However, this would still maintain their 2.25% rate as higher than that of the US (0 - .25%) and the UK (2.00%). Higher rates tend to attract foreign investors seeking higher yields, potentially strengthening the associated currency.

Oil's recent rally was put on hold yesterday, after peaking at over $50 a barrel. Since the close of trading yesterday, oil has settled in the $48-$49 dollar range. Both the Canadian dollar and Australian dollar are quiet this morning as a result.

Economic numbers of note today include MBA Mortgage Applications along with Challenger Job Cuts. Many will be watching tomorrow and Friday as Initial Jobless Claims and Nonfarm Payrolls will give further insight into the shape of the US economy. Market consensus for Friday's unemployment rate is 7.0%; figures around or above that number will most likely be negative for the dollar.