Crude oil trades narrowly below 70 in European session. Although price at 68/69 has attracted buyers, the overall tone remains cautious as the market awaits weekly inventory data by API (Tue) and the US Energy Department (Wed). Apart from strength in USD, last week's selloff in oil price was due to concerns about huge inventory and dismal demand.

Gold price retreats again after staging a modest rebound yesterday. Currently trading at 1115, the precious metal will continue to consolidate around 1110/20 in the near-term.

Strength in USD is the main reason pressuring commodities. The greenback resumes rally against major currencies after pulling back for only 1 day, indicating resilience in the dollar. Against the euro, USD rose to as high as 1.4533, the highest level since October 3. Speculations that the Fed will trim stimulus measures and credit uncertainty in Greece pushed the dollar higher.

The December FOMC meeting will be held Tuesday and Wednesday. Volatility usually increases before and after FOMC meeting, although we do not anticipate any significant change on the policy statement. The Fed Chairman Ben Bernanke will announce the Fed funds rate will stay at 0-0.25% and current economic conditions justify it to remain low for an 'extended period'. While it's a pleasant surprise that the jobless rate fell to 10% in November as a result of addition in payrolls, one month's data should not change the central bank's stance. Moreover, the Fed normally raises interest rate only after the unemployment rate has fallen for several months. We expect the Fed will, while acknowledge improvement in market development, remain cautious.

The downgrade last week continues to affect investors' confidence on Greece. The government bonds plunge amid expectation that nation's deficit will remain high - unable to meet the level (less than 3% of GDP) required by the EU. The 10-year government bond yield increases to 5.63% today while the spread with German bund yield widens to 246 bps.

The dollar also advances against commodity currencies including Australian dollar, New Zealand dollar and Canadian dollar. Aussie slid after the RBA minutes signaled a pause in rate hike is possible. Officials said in the minutes for December's meeting that previous rate hikes has been 'materially shifting the stance of policy to a less accommodative setting and, therefore, as increasing the flexibility available to the board at future meetings'. USD may rise further should the Fed statement provide some upbeat ingredients.