•  Chinese New Year, but jitters over rate hikes
•  Eurozone data sparks ECB fears
•  Canadian dollar is January’s worst performing currency

The Year of the Horse ushers in the Chinese New Year today, with up to 1 billion people attempting to get home for the holidays while the usual month-end rebalancing flows signal to the FX market that the end of the month has arrived. There was a lot of nervous tension at the start of the week, with traders on edge over rapidly sinking emerging market currencies ahead of Wednesday's Federal Open Market Committee (FOMC) meeting. Speculation concerning an emergency meeting for the Central Bank of the Republic of Turkey on Tuesday eased some of the jitters, and the news that Turkey's central bank doubled a couple of key rates sparked a sharp but short-lived TRY rally. The central banks in India and South Africa followed suit with their own but less extreme rate hikes. No-one was really surprised when the FOMC announced another USD 10 billion reduction in asset purchases on Wednesday although the renewed selling pressures on emerging market (EM) currencies would suggest otherwise.

US dollar is bid

The US dollar is bid. Wobbly emerging markets, even shakier eurozone inflation data and an FOMC seemingly committed to a steady tapering program has led a shift to risk-aversion trading, with JPY and CHF gaining in the process. Today's eurozone inflation data (0.7 percent) will renew concerns that the European Central Bank (ECB) will cut rates next Thursday. This week's US data has been upbeat, and weak reports, such as durable goods, have been discounted due to the impact of severe weather. US Q4 Real GDP came in, as expected, at 3.2 percent, annualised. In addition, the inflation data (Core PCE 1.2 percent y/y) released this morning provide extra layers of support to the arguments for the tapering programme to continue at its current pace, as the US economic recovery gains traction. The positive outlook for US economic growth is likely to be reinforced next week with the Purchasing Managers' Index (PMI) and trade data due ahead of the non-farm payrolls report (forecast 74,000).

Loonie suffers Justin Bieber effect

 A “Deport Justin Bieber” petition has reportedly become one of the most popular of all petitions to the White House, with more than 100,000 Americans with too much time on their hands clamouring for the Canadian pop star's expulsion from the US.