This week starts with the US markets closed today due to a national holiday, however the market saw the euro and pound gain during the Asian session, but by the time the European opened, these gains were reversed. The news of the first US bank in 2009 to fail hit the wires earlier, stating that yet another bank failed in the US making it the first failure for 2009, put further pressure on market participants and risk aversion may come back today as a result.

The EUR/USD opened with a gap of more than 80 points on the upside, however the move so far has found resistance at 1.3385. A clear break of that level may lead to further gains towards 1.35, however at the moment things are starting to look gloomy for the European currency and thin trading conditions later may make things less volatile! The pair now trades below 1.33 and a clear break of 1.3250 may open a further way towards 1.32

The economic calendar is almost empty of important events today and the fact that US markets will remain closed may slow things even further. The big news today cones from the UK and therefore puts further pressure in the pound, as the Royal Bank of Scotland announced that its loses may reach 28 million pounds, the biggest in UK history! That together with Darling's latest plan to save UK banks from failing by adding another 149 billion pounds to the system, gave investors a new wave of uncertainty for the future of the economy and more reasons for the pound to plunge!

This week, although not packed with important economic releases out of the US, may turn out to be crucial for the dollar's direction amid tomorrow's inauguration of President Barack Obama. Analysts predict that the new President may enjoy a rally in the markets after his swearing-in, as traders may look up to Obama for hope of a better economic tomorrow. However, with banks reporting losses almost daily and economic data deteriorating at a fast pace, together with Bernanke’s new stimulus plans which left markets cold, investors may choose to exit their risky positions once again and find consolidation in the dollar!

So, get ready for another interesting week for all markets out there, and watch the pound's direction these days as important economic data is coming out almost daily, together with the minutes of the last monetary policy decision! The question now is not if the bank decides to actually adopt a zero policy rate in the coming months but how it will handle the aftermath of deflation. The economic outlook for the pound continues to look gloomy and another sell off in the GBP/USD may be on the cards for the coming weeks…