Despite the US dollar falling to a new four month low against the pound at yesterday lunch time; the currency did manage to finish marginally higher against the pound and the euro after the Financial Times reported that Fed Chairman Ben Bernanke is likely to signal a tapering of its quantitative easing program in Wednesday’s monetary policy press conference.

Despite the US dollar falling to a new four month low against the pound at yesterday lunch time; the currency did manage to finish marginally higher against the pound and the euro after the Financial Times reported that Fed Chairman Ben Bernanke is likely to signal a tapering of its quantitative easing program in Wednesday’s monetary policy press conference.

The US dollar also managed to gain some support following some encouraging data from the NY Empire State Manufacturing Index which beat expectations, rising to a three-month high of 7.8 from -1.4 in May. The NAHB housing market index also rose to 52 from 44 in June.

Another factor supporting the US dollar was a report by the Bank of Japan showing that its current account balance will rise to an all time record amid the BoJ’s stance on unprecedented stimulus.

The Indian rupee fell even further yesterday and also this morning after the Reserve Bank of India held interest rates at 7.25%

The only other notable data from yesterday showed that the euro zone posted a smaller than forecasted trade surplus coming in at €16.1bn.

Overnight, the Reserve Bank of Australia indicated in its latest minutes that further rate cuts cannot be ruled out given the inflation outlook in the economy. The Australian dollar continued its recent trend of weakness falling by 0.65% overnight. Due to the outlook made by the RBA, further losses in the Australian dollar cannot be ruled out.

Looking ahead to today, inflation figures are due for release from the UK and the US. Also of focus for investors will be the ZEW survey of economic sentiment from Germany, a rise to 38 is expected which accounts for the strength in the euro so far this morning.

Key Announcements:

9.30am – GBP – Consumer Price Index (YoY) (May): Expected to rise to 2.6%.

9.30am – GBP – Producer Price Index (YoY) (May): Expected to rise to 1.5%.

10.00am – EUR – German ZEW Survey on Economic Sentiment (Jun): Expected to increase to 38.

10.00am – EUR – Euro zone ZEW Survey on Economic Sentiment (Jun): Expected to increase to 29.4.

13.30pm – USD – Building Permits (May): Expected to fall to 980,000.

13.30pm – USD – Housing Starts (May): Expected to rise to 924,000.

13.30pm – USD – Consumer Price Index (YoY) (May): Expected to rise to 1.4%.