The broad based deep selloff in Sterling that's triggered by RBS losses and UK's second bank bailout package extended further in Asian session today. Investors are clearly unconvinced by UK's 100b pound bailout, that includes a term that banks must agree to have specific and quantified lending commitments that will be binding and externally audited, as mutual responsibility as PM Brown said yesterday. In particular, markets are worried of a downgrade in UK government debts if losses in bank assets accelerate. GBP crosses dominate the top movers list so far today as GBP/JPY dives to new record low of 127.39. GBP/USD resumes medium term down trend to 1.4133 so far. Meanwhile, EUR/GBP extends the recovery to as high as 0.9184.

Dollar and yen, on the other hand, rides on risk aversion and soars broadly. Nikkei was down over 2%. As mentioned in our weekly report, we're expecting major stock index to extend lower to retest last Oct/Nov's lows. Further dollar and yen strength could be seen if European stocks extend yesterday's loss later today. Dollar index rises further to as high as 85.48 today. Short term outlook remains bullish as long as 83.46 support holds and the dollar index is expected to extend current rise from 77.69 to retest 88.46 high.

On the data front, in the UK, December's CPI probably fell deeper by -0.8% mom, a third consecutive monthly decline, following November's -0.1%, as pre-Christmas sales and value-added tax should have caused great drop in consumer price inflation. On yoy term, CPI is expected to slow sharply from 4.1% to 2.7%, back into BoE's 2-3% range for the first time since last March..

Germany's ZEW should have improved for the third consecutive month to -44 in January while still in negative territory. ZEW in the Eurozone is also expected to have improved slightly to -46 from -46.1 in the previous month. Rate cuts in the Eurozone as well as the government's spending package probably helped boost sentiment but the gauge should remain weak in the near-term as both European and global economy are still at trough.

The Bank of Canada will announce rate decision today. Economists forecast the central bank will reduce the policy rate by 50 bps to 1%. In the previous meeting in December, the BoC had aggressively cut interest rates by 75 bps in order to stimulate Canadian economy. Moreover, the country's manufacturing shipments in November probably slid 0.5% mom, matching the drop in October.

Released overnight, New Zealand's Q4 CPI plunged -0.5% qoq (consensus:-0.4%, Q3: 1.5%), the most in a decade. On annual basis, inflation slowed sharply from 18 year high of 5.1% in Q3 to 3.4% in Q4. The lower-than- expected CPI will open the door for RBNZ ito have another massive rate cut on Jan 28.

Japan's tertiary industry index dropped 0.9% mom in November, below market expectation of -0.8% and a revised 0.5% in October. Consumer confidence dropped more than expected from 28.4 to 26.2 in December.