Huge rate decisions this week.

The US PCE prices index increased 0.1% for December with the year-on-year rate declining to 5.0% from 5.5%. There was an underlying increase in prices of 0.3% with the year-on-year rate declining to 4.4% from 4.7%.

Both figures were in line with consensus forecasts with the core rate at a 13-month low.

The University of Michigan consumer confidence index was revised marginally higher to 64.9 from the flash reading of 64.6 with a small dip in current conditions offset by stronger expectations.

The 1-year inflation expectations index was revised lower to 3.9% from the initial reading of 4.0%.

The dollar secured a further small net advance on Friday with some corporate buying ahead of the month-end period.

CFTC data recorded a small decline in short yen positions to near 21,500 contracts in the latest week from 23,000 previously, limiting the scope for further yen short covering.

The latest UK Lloyds Bank business survey recovered to a 6-month high with companies aiming to boost employment.

Chinese markets re-opened on Monday following the week-long holiday. There were reports that there would be further measures to boost consumption and extending lending programmes.

The Federal Reserve, ECB and Bank of England will all announce their latest policy decisions this week.

Consensus forecasts are for the Federal Reserve to increase rates by 25 basis points to 4.75% with 50 basis-point hikes by the ECB and Bank of England to 3.00% and 4.00% respectively.

EUR/USD was again unable to hold above the 1.0900 level on Friday and lost ground after the Wall Street open. There was an element of position adjustment with month-end corporate buying which underpinned the dollar. EUR/USD dipped to lows at 1.0840 before regaining some ground and traded around 1.0865 on Monday.

Lower yields undermined the dollar against the Japanese currency. USD/JPY was unable to hold the 130.00 level and traded around 129.60 on Monday from 129.20 lows.

There was little net change in the Swiss franc during the day. EUR/CHF held above the 1.0000 level with USD/CHF around 0.9215.

Sterling was underpinned by solid risk conditions during Friday with some medium-term hopes over the outlook. GBP/USD did hit selling above 1.2400, but was close to this level late on Friday and again on Monday.

Commodity currencies were held in tight overall ranges. AUD/USD settled just above the 0.7100 level on Friday and drifted below this level on Monday amid mixed signals from China.  USD/CAD dipped to re-test 1.3300 support before correcting and settled around 1.3330 on Monday.