News and Events:

This weekend's G7 was uneventful and did nothing to shift markets sentiment and was actually a slight disappointment. Policy markers basically left the currency portion of the accompanying statement'sunchanged, stating 'Excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability.' and 'We continue to monitor exchange markets closely, and cooperate as appropriate.' The accompanying statement however did praise China for their prompt fiscal response and commitment to a more flexible exchange rate saying that 'We welcome China's fiscal measures and continued commitment to move to a more flexible exchange rate, which should lead to continued appreciation of the CNY in effective terms and help promote more balanced growth in China and in the world economy.' Perhaps one interesting fact was the lack of discussion or official comment regarding the Gbp weakness or Jpy strength. US Treasury Secretary Geithner came under additional fire from G7 ministers who are looking towards the US to firmly handle the credit crisis. However, similar to criticism at home, the consensus from finance ministers and central bankers in Rome was that the plan lacked details.

This morning's Japanese GDP Q4 release showed a contraction of -3.3% q/q un-annualized, -12.7% annualized, second quarter with Japan in recession territory. It was a nasty drop in net exports and contraction in CAPEX spending, which pulled down growth. This will become a critical week for the Jpy. As the effect of the global slowdown on the domestic economy becomes transparent, markets have time to react to recently announced stimulus package and the BoJ policy meeting later in the week. We see substantial downside risk for GDP centered on exports and consumption and expect the Jpy to weaken near term.

The Confederation of British Industry (CBI) reported that the UK economy would contract at twice the pace than previously expected. The largest UK business lobbyists now expect the UK GDP to shrink 3.3% vs. 1.7% prior.

On Friday, the US Congress passed a $787bn stimulus package, despite significant opposition from Republicans. President Obama is expected to sign the bill later today. Also on Friday, JP Morgan, Citigroup, and Morgan Stanley announced plans to suspend foreclosures, which could be a significant market positive as the action goes right to the heart of the financial crisis.

Today there are no critical scheduled releases, which, combined with the US public holiday, should lead to a relatively calm trading day.

Today Key Issues:

* 09:00 NOK Trade balance, NOKbn Jan 26.9 prior
* 23:50 JPY Tertiary Industry Index, m/m, % Dec -1.6 exp, -0.9 prior

The Risk Today:

EurUsd Pair still trading in a wide bearish channel but now challanging horizontal support at 1.2706. A break of support will place the focus on 1.2550. Intra day support now stands at 1.2866 (5d MA).

GbpUsd Sharp recovery from 1.4986 give the pair a bearish tone. A break of near term support at 1.4080 will tigger a broader move to 1.3506.

UsdJpy The upward move neutralises the bearish tone with focus on 92.42. Upside penetration of 92.42 will call for a rebound towards 94.62.

UsdChf Constuctive above 1.1400 with near-term focus on 1.1715. support stands at bullish channel support at 1.1620.