The price action in London trading was highlighted by more pound weakness. Cable plunged another -175 pips towards 1.3930 and the first time through $1.40 since 2001. Concerns that the UK banking system may need more bailout funds and that the economic downturn will be more pronounced than previously anticipated continued to weigh on GBP here.

EUR/USD ticked a touch higher and was up about 30 points into the 1.2960/70 zone. Economic data were better than anticipated as the eurozone ZEW economic sentiment index came in at -30.8 in January, an improvement from the -46.1 read the prior month. The German current situation index, however, registered a dismal -77.1 and is down from an already bleak -64.5 previously. EUR is likely to remain heavy while below 1.30 and the recent and potential future credit rating cuts should keep the currency impaired short-term.

The Bank of Canada will meet today and is expected to announce its rate decision at 9:00am ET. The market consensus is that the bank will reduce the key interest rate by -50 basis points to 1.0%. With the decline in economic activity and commensurate slowing in inflation, the bank will doubtless take rates lower. From the most current data we have in hand, it is clear that the Canadian economy continues to downshift.

With the fundamental picture deteriorating and oil prices revisiting 2008 lows, the bank will be hard-pressed not to cut by a sizeable amount. While the cut itself will likely get little reaction – barring a much more aggressive -75 or -100 bps decision – the accompanying press statement should elicit some CAD weakness.

Upcoming Economic Data Releases (NY Session) prev est

* 1/20 13:30 GMT CA Manufacturing Shipments MoM NOV -0.50% -0.50%

* 1/20 14:00 GMT CA Bank of Canada Rate 20-Jan 1.50% 1.00%

* 1/20 20:20 GMT UK BOE's King to Make Speech in Nottingham 20-Jan

* 1/20 21:45 GMT NZ Retail Sales (MoM) NOV -1.30% -0.90%

* 1/20 21:45 GMT NZ Retail Sales Ex-Auto (MoM) NOV 0.80% 0.00%

* 1/20 22:00 GMT US ABC Consumer Confidence 18-Jan -49 - -