[20:21 GMT January 16]

EUR/USD fell unexpectedly hard this morning, unable to
sustain gains on the back of a very firm ZEW report. Dealers came to the
conclusion that the ZEW will likely cause the ECB to accelerate its tightening
cycle. Heavy profit-taking in EUR/USD and GBP/USD helped knock prices lower.
Comments from the Saudi oil minister helped fuel the USD rally as well, as he
said the cartel did not need any further production cuts. Lower oil prices
support the USD on multiple levels, not least of which is the boost it gives to
US consumers as well by cutting the current account and trade deficits. Prices
fell to 1.2910 in New York from 1.2990 highs in Europe, retracing just over
61.8% the bounce from 1.2868 lows on Friday morning.
Looking ahead to Wed’s data, Industrial production is seen rising 0.1% while
anything above $60 bln will not cause any waves for the TIC data. With the
current account and trade deficits falling, funding the current account gap is
becoming less of a focus for the market. Look to take advantage of any USD drop
on a monthly short- fall in the TIC surplus. Jamie.Coleman at Thomson.com