BoE interest rate announcement is the highlight today where markets expect 50bps cut to an all time low of 1.50%. Indeed, any rate cut will send the benchmark interest rate into uncharted territory. There are some speculations that BoE will surprise the markets by cutting deeper by 75bps or 100bps but as policy rates approaches zero, it's believed that BoE will tends to make small reduction each time. The tricky part of the picture is Sterling's strong rebound despite wide expectation of a full-blown recession in the UK and that BoE enter the era of Zero Interest Rate Policy sooner or later. We want to emphasize that markets are forward looking. ZIRP is priced in in the pound for some time already and it's indeed time to close out short positions based on such expectation as such expectation gradually becomes facts. Hence, while some knee-jerk reactions might be seen after today's BoE announcement, the pound's rebound against Euro and Yen is likely to carry on after initial volatility.

EUR/GBP is still struggling around 0.9 psychological support (with 50% retracement of 0.8234 to 0.9798 at 0.9016). Intraday bias remains on the downside as long as 0.9174 minor resistance holds and further decline is still in favor. Decisive break of the fibo support will build up the case that 0.9799 is a medium term top and put focus down to trend line support at 0.8758. A break above 0.9174 will provide the sign of stabilization instead and bring recovery.

On the data front, Australia's trade surplus narrowed to A$ 1.448B (consensus: A$ 2.05B) in November from A$ 2.952B in October with exports dropping 4% while import rising 2%. Lower trade surplus indicated Australia's economy is still sluggish and reinforces RBA to adopt aggressive monetary easing policy.

Swiss unemployment rate rose from 2.7% to 2.8% in Dec. CPI is expected to continue the down trend and drop from 1.5% to 1.0% yoy in Dec.

Germany trade surplus shrank sharply more than expected from 15.8B to 9.7B in Nov with sharp -10.6% mom drop in exports and -5.6% mom drop in imports. Economists forecast November factory orders would have slid 1.6% mom. Though less significant than -6.1% in October and -8.3% in September, the year-on year rate would come in at -19%, compared with -17.3% in October.

Eurozone business climate and consumer confidence in December are anticipated to have slipped further to -2.72 and -26 respectively. As we have received poor employment data in Germany yesterday, it's reasonable to predict a worse employment situation in the Eurozone and economists forecast its unemployment rate to have risen to 7.8% in November from 7.7% a month ago. Moreover, Q3 final GDP is expected to have contracted 0.2%.

Later in the US, after last week's decline to 492K due to holiday season, initial jobless claims for the week ended Jan 3 should have increased by 540K units while the 4-week average should come in at 544K. Another highlights of today will be a speech by President-elect Barack Obama on his proposed economic stimulus plan.