Evening Report-Jan 20.

The Rupee has slid to a new multi-week low to the dollar and closed at 49.20 levels on the back of greenback gaining ground against the Asian currencies and stocks losing way .Empty U.S. economic calendar will leave dollar price action at the mercy of risk winds. More banking troubles have ushered in another round of risk aversion which has benefited the dollar. U.S. markets were closed yesterday and we could see traders start to price in the impact of the U.K. bailout plan and RBS’s troubles. Additionally, the U.S. presidential inauguration could have an impact on price action, which is historically a down day for equity markets. However the major event risk during the U.S. session will come from the BoC rate decision. The MPC is expected to lower their benchmark rate by 50 bps which could add to recent “loonie” weakness. Euro fell below 1.300 for the first time in a month on the back of increasing risk aversion, before a better than expected German ZEW print lent support. Indeed, confidence among German investors increased form -45.2 to -31.0, which was the first improvement in four months. The ECB’s willingness to continue cutting interest rates and the announcement of a German fiscal stimulus package has raised optimism .Pound has remained under pressure since yesterday’s announcement of a £100 billion bank bailout, as it increased concerns that the global financial crisis isn’t over and the country’s recession will deepen. The Sterling fell below 1.400 reaching as low as 1.3936, despite a stronger than expected CPI report. Indeed, inflation in the U.K. slowed to 3.1% from 4.1% in November, which was significantly above estimates of 2.6%. Prices remain above the BoE’s 3% threshold which may give the central bank a reason to pause their easing policy despite the ongoing contraction in the economy. As expected falling oil prices dragged energy costs and retailers slashing prices to lure customers during the Holidays led to a 4.1% drop in apparel prices. However, despite food prices increasing by 0.6% , core prices fell to 1.1% which was below estimates of 1.3% and down from 2.0% the month prior. The announcement of RBS that the bank experienced the biggest corporate loss in British history has raised expectations that the bank will become nationalized. The ongoing troubles of the financial sector and the deepening recession are expected to lead to a ZIRP and quantitative easing from the BoE. There has also been talk of a possible downgrade of the country’s debt if the banking losses continued. Yen climbed against the dollar as the currency is seen as a safe-haven in times of economic uncertainty. Japanese household consumer sentiment deteriorated as economic downturn hit consumers' assessment on employment