The Usd was stronger in the Asian session, as risk aversion remains the dominate theme. Friday's close saw the S&P500 drop a further -2.3%, while 10-year Treasury yields fell by 2bp. The EurUsd slid from 1.2799 to 1.2708, while the UsdJpy dropped from 90.06 to 89.51. US GDP growth for Q4 managed to decline by 3.8%(annualized) vs. -5.5% q/q exp decline. However, GDP is a lagging indicator and perhaps of more interest was the Chicago PMI, which fell to 33.3 from 35.1, worse than market expectations at 34.9. In addition, there are reports that there might be delays in the US establishment of a 'bad bank', which was expected to absorb bad debt on bank's balance sheets. The lack of optimism and risk appetite will continue to benefit the Usd. Asian equity markets are currently lower, with only Shanghai bucking the trend and European stocks are also currently lower. This week's scheduled highlights will center on the ECB, BoE and RBA interest rate setting meetings.

The RBA is the first central bank to meet this week and we expect the CB to cut 75bp to 3.50%. Growing evidence that the Australian economy is in a recssion, for the first time since 1991, will pressure the RBA to cut interest rates aggressively. Next will be the BoE interest rate decision on Thursday and markets are expecting a 50bp cut to 1.50%. The MPC has recently slowed the pace of monetary easing, however, the economic outlook has deteriorated further which will force members to react. Finally, and perhaps the most anticipated, will be the ECB interest rate decision on Thursday. ECB President Trichet continues to insisting that the next 'important' monetary policy meeting will not be until March, which has basically excluded any easing. The markets are expecting the ECB to hold rates steady at 2.00%.