US Dollar: Policy Tightening and Mounting Risk Build Bullish Pressure Euro Forecast Unclear Amidst Greek Debt Crisis Japanese Yen Torn Between Fed Policy Outlook, Risk Sentiment British Pound May Benefit From Revised 4Q Growth Figures Swiss Franc to Maintain Near-Term Trend Against U.S. Dollar, Euro Canadian Dollar Benefits from its Fundamentally Stable Position Australian Dollar Forecast to Gain as S&P 500 Hits Highs New Zealand Dollar to Gain as Risk Recovery Resumes

•    Euro: PMI Data Keeps the Focus off Greece and On Growth •    British Pound Takes a Final Hit from the Economic Docket to End the Week •    Canadian Dollar Slowly Builds Strength as Retail Sales Data Adds to a Solid Fundamental Outlook •    Australian Dollar: How Much Influence does the Global Economy’s Health have on the RBA’s Decisions?

The late session drop from crude yesterday in response to a surprise tightening of the Fed’s monetary policy proved temporary (just as it was for the US dollar). Broad-based risk appetite recovered its footing and developed reasonable momentum, lifting the trader-friendly commodity to a five-week high while simultaneously keeping within the general channel that has defined price action since the February 5th reversal.

The Euro extended the decline from earlier this week and slipped to a fresh yearly low of 1.3443 as investors scaled back their appetite for risk, and the single-currency may face increased selling pressures going into the North American as equity futures foreshadow a lower open for the U.S. market.

The US Dollar is likely to extend gains against the Euro and the British Pound as European economic data comes in soft, underscoring the likelihood of a relatively hawkish Fed versus the BOE and ECB, while falling stock index futures point to risk aversion.

While many had heard the warnings from Fed Chair Bernanke in the previous week of a near-term raise in the discount rate, most did not believe it would come so soon, and in such unpredictable and untimely manner.

After a week of severe volatility as the market made a critical and dispassionately blunt assessment of the global market’s health, it was only natural that things would even out. With the winds of risk aversion blowing at a category 3 hurricane force, it wasn’t difficult to point out burgeoning problems like Greece’s potential default or China’s efforts to curb growth and speculation. However, without specific catalysts, a temporary balance would return.

•    British Pound: How Fundamentally Surprising is News of the First January Deficit in at least 17 Years •    Euro Stability a Temporary Break from Reality as the News from Greece Worsens •    Canadian Dollar Shows Little Reaction to a Real Interest Rate Threat in CPI Numbers •    Japanese Yen: The BoJ Pushes Back Against the Government’s Pressure to Further Loosen Policy

Underlying investor sentiment trends passed another day with a mute, bullish bias that would encourage benchmark crude futures prices to a fresh one-month high. Showing just how connected the commodity is to risk appetite; the commodity was little changed through the early morning sessions and lacking direction heading into the open of the US session.

• Dollar Suffers its Biggest Drop in Nearly Three Months as Risk Appetite Surges, but Will it Last? • Euro Benefits from the Dollar’s Tumble but Greek Bailout Troubles Endure • British Pound Finds Little Encouragement from Inflation at Levels that Historically Point to Rate Hikes • Australian Dollar Rallies after RBA Minutes Reveal Last Meeting’s Hold was a Close Call

The U.S. dollar is likely to face increased volatility over the next 24 hours of trading as economists forecast consumer prices to expand to an annual rate of 2.8% in January, and a rise in inflation could stoke speculation for a rate hike as the Federal Reserve aims to normalize policy this year.

The British Pound tipped lower for the second day as the economic docket reinforced a weakened outlook for the economy, and we may see the exchange rate maintain the narrow range carried over from the previous week as the overnight decline appears to have stalled at a low of 1.5575.

Crude oil, gold and silver are positioned to extend losses with prices still locked in with risk sentiment as US equity index futures trade lower, pointing to building selling pressure ahead of the opening bell on Wall St.

The US Dollar advanced as stocks slid in Asian trading after a disappointing round of Australian reports and comments from a German ruling coalition party leader arguing against bailing out the debt-ridden Greek economy.

Any hopes for a recovery in the Euro have all but faded, following Wednesday bearish price action, which now suggests that the market is more likely in some form of a consolidation ahead of the next drop below 1.3530.

• Dollar Recovers All of Tuesday’s Losses but not Through Risk Trends or a Hawkish FOMC Minutes • British Pound Can’t Find its Footing between a 13 Year High in Unemployment and BoE Minutes • Euro: Policymakers Hope Market Fear Over Greece has Passed but Situation Worsening • Japanese Yen: What Should Traders Expect from the Bank of Japan Rate Decision?

Risk trends defined the dollar’s rally; and they can likely bring it to a close. Over the past week, the greenback’s status as a primary safe haven and funding currency was still in control; but the underlying currents of sentiment had shifted.

This Wednesday, the Federal Reserve released its Federal Open Market Committee minutes. Unlike in previous FOMC meetings, the decision to keep rates unchanged was not unanimous and Thomas Hoenig voted against the policy action. According to the minutes “Mr. Hoenig dissented because he believed it was no longer advisable to indicate that economic and financial conditions were likely to "warrant exceptionally low levels of the federal funds rate for an extended period." In recent months, economic and financial conditions improved steadily, and Mr. Hoenig was concerned that, under these improving conditions, maintaining short-term interest rates near zero for an extended period of time would lay the groundwork for future financial imbalances and risk an increase in inflation expectations. Accordingly, Mr. Hoenig believed that it would be more appropriate for the Committee to express an expectation that the federal funds rate would be low for some time--rather than exceptionally low for an extended period. Such a change in communication would provide the Committee flexibility to begin raising rates modestly. He further believed that moving to a modestly higher federal funds rate soon would lower the risks of longer-run imbalances and an increase in long-run inflation expectations, while continuing to provide needed support to the economic recovery.” The US dollar reacted positively to the minutes judging by the initial rally on the USD/JPY exchange rate.

Consumer prices in Canada are expected to rise to an annualized pace of 1.8% in January, which is just shy of the 2% target held by the central bank, and the rebound in price growth is likely to stoke expectations for a rate hike as the Bank of Canada aims to normalize policy this year.

Unemployment in the U.K. unexpectedly pushed higher in January to mark its highest reading since April 1997. Jobless claims increased 23.5K  to 1.96M after falling a revised 9.6K in December amid expectations of10.0K contraction, the National Statistics said today in London.

Oil, gold and silver are positioned to extend recent gains amid signs that the upward correction in risk appetite will continue but the upcoming release of minutes from January's US Federal Reserve monetary policy meeting may undermine the bullish scenario.