Evening Report-Jan 27.

Indian Rupee trimmed its rise and ends at 49.93 levels for the day after the Reserve Bank of India retained its key interest rates and cash reserve ratio at its monetary policy to leave headroom for further rate cuts.The lack of tier-one data could leave the U.S. dollar at the mercy of risk trends however, a considerable improvement in consumer confidence could spur volatility for the greenback. Meanwhile as market participants expect the Richmond Fed manufacturing index to increase to -49 from -55, a rise in production could help to brighten the outlook for the world’s largest economy, but as the S&P/Case-Shiller home price index is expected to fall further, the dire state of the housing market could overshadow an improved outlook for production. Euro surged to a high of 1.331 following a rebound in the German IFO survey but the intra day rally was short lived as the current account deficit widened to 16.0B from a revised reading of 6.0B in October. Fading demands from the global economy has certainly dragged on economic activity and the outlook for growth remains bleak as the European Commission forecast the annual rate of growth to contract 1.9% this year. Nevertheless a separate report showed that import prices in Germany dropped another 4.0% in December after falling 3.4% in the previous month, which lowered the annual rate to -5.1% from -1.3%. Meanwhile, the current account deficit for the Euro-region more than doubled as demands from abroad weakened further, and the disappointing trade figures continues to reflect a dour outlook for the Euro-Zone, which could lead the European Central Bank to continue its easing cycle over the coming months in order to avoid a deepening recession. British pound reached a high of 1.4242 as the U.S. dollar weakened across the board, and may continue to retrace the sell off from the previous week as investors increase their appetite for risk. Meanwhile the U.K. CBI retail sales survey showed a minor improvement in demands as the index increased to -47 , Despite the improvement in sales, the outlook for spending in February hit a record low as the economy faces its worse recession in over a decade. As the U.K. economic calendar remains fairly light for the remainder of the week, risk sentiment is likely to dictate price action for the Sterling and its currency crosses. yen fell as the Japanese government planned to inject capital into ailing companies prompting some investors to take on riskier trades. currency fell as a rally in stock prices revived investors' risk appetite.