Dollar Soft

The US dollar remains soft.  The euro has rebounded back above $1.46 after having been pushed briefly through the $1.45 level, despite the  periphery in Europe remaining under pressure.  Sterling is the main exception to the dollar weakness story and the dovish comments from BOE's Weale before the weekend, coupled with the softer  CBI trends survey that takes the shine off last week's retail sales data are the proximate culprits. 

Last year's Greek deficit was revised to 10.5% of GDP from 9.4% and this has seen Greek debt instruments sell off hard.  Merkel's economic advisor seemed to join the recent chorus and cited the importance of a restructuring of Greek debt.  It is supposed to return to the markets next year.  If this doesn't happen, and it looks difficult to see how it will, it will need more aid.  This will be politically difficult given the climate in Euorpe and that fact that Germany (and France) hold elections. 

FOMC begins its meeting today followed by a press conference tomorrow.  The key take away, and I will elaborate in another post shortly, is that QEII continues.  Fed revises GDP and unemployment forecasts lower to recognize the recent series of data and may tweak its inflation forecast higher.  The press conference will be interesting, but increased transparency does not mean increased visibility.  No policy implications, evne if there is some short-term choppiness.