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The US Dollar may decline in European trade as US equity index futures trade 0.6% higher ahead of the opening bell, pointing to a rebound in risk appetite that could weigh on the safety-linked greenback.

Key Overnight Developments

• New Zealand Dollar Little Changed After RBNZ Rate Decision
• Japanese Retail Sales Disappoint as Consumer Confidence Flounders

Critical Levels



The Euro is little changed heading into the European session after prices retraced nearly all of the drop below 1.40 seen in early overnight trade. The British Pound has also yielded an effectively flat result, reversing lower late into Asian trading after testing as high as 1.6229 against the greenback. We remain short EURUSD at 1.4881.


Asia Session Highlights



The Reserve Bank of New Zealand kept benchmark interest rates unchanged at 2.5% as expected. RBNZ Governor Alan Bollard said annual inflation is expected to track comfortably within the target band over the medium term, reiterating that the bank expects to begin removing policy stimulus around the middle of 2010. The reaction from the currency markets was understandably muted considering the outcome offered no significant changes in policy expectations.

Japan’s Retail Trade report showed sales fell much more than economists expected in December, slipping -1.2% versus calls for a -0.2% decline. In annual terms, sales fell -0.3%, disappointing expectations forecasting the first increase 15 months. The outcome follows a report last week that showed consumer confidence fell for the second consecutive month in December amid expectations of deepening unemployment.