Dollar remains generally higher this week except versus Aussie. Stabilizing sentiments in stock markets is giving the greenback some support. But overall there is no sign of a change in trend in the risk markets yet. DJIA is still vulnerable to a break of 16000 handle in in spite of yesterday's 227.6 pts rebound. Crude oil is hovering above 30 for the moment and is set for another take on this handle again in near term. Meanwhile, dollar remains bounded in range against euro, yen and swiss franc. Yen crosses are also taking a breather after recent sharp fall. The markets are waiting for new triggers after recent volatility.
In US, St. Louis Fed president James Bullard warned that both market-based and long-term measures of inflation expectations were decline and were becoming "worrisome". And, recent slump in oil price was "very substantial" and would have impact on Fed's rate decision this year. According to a Reuters poll, economists are seeing only up to three rate hike by Fed this year, bringing the federal funds rate between 1.00% and 1.25% by the end of the year. As of yesterday, markets are only pricing in 41% chance of a rate hike in March.
In Japan, there were reports that BoJ could considering cutting its inflation outlook for fiscal 2016 due to the fall in energy prices. The central bank will meet on January 28-29 and might revise down fiscal 2016 inflation forecast to 1%, down from October's projection of 1.4%. And some economists urged that the situation cried for more stimulus, the sooner the better as the 2% inflation target is not in sight.
On the data front, Australia home loans rose 1.8% in November. UK construction output and Eurozone trade balance are the only features in European session. A bunch of economic data will be released from US today, including retail sales, PPI, Empire State Manufacturing, industrial production, business inventories and U of Michigan sentiments.