Currency markets continued to drift in directionless trading overnight, with the Japanese Yen still the main focus of attention. The US Dollar had regained some of its losses in North American trading but seemed stuck around the 118.50 level in Asian trading. Near the close of the markets the release of January Japanese Consumer Confidence data showed a rise to 49.5 from 46.5 the previous month, a bit better than the expected 48. The February Bank of Japan (BoJ) report showed that it had left unchanged its assessment of the economy, saying that the Japanese economy is showing a ’steady recovery’. It also expressed confidence that deflationary pressures which have plagued the Japanese economy for years now, are easing. 'Japan's economy continues to recover steadily,' was the phrase repeated in the February report from January. So no surprises there despite the rumours.
Forex traders have taken the US Dollar higher against the Japanese Yen, but the Euro, British Pound and Swiss Franc have all made very modest gains. The Swiss Franc failed to react to the early morning release of Swiss consumer sentiment index data. It recorded a reading of +2 points in January, up from -15 in December. Economists had forecast a reading of -1 points to -12 points.

Today, Fx traders in Cable will be focusing on the release of the December trade balance at 09.30 GMT. Expectations are for a deficit of 5.6 bln vs. a deficit of 5.7 bln last month. The Bank of England are also meeting but are expected to leave interest rates unchanged at 4.5pct. The British Pound remains pegged under the resistance at 1.7500 and support just under 1.7390.
The focus of the US Dollar will continue to be on the Friday release of US Trade Balance data.