UBS - "This week's key points for currencies are:

- upcoming FOMC forecast round key for dollar strength

- ECB inaction to support euro on the crosses

- the new BoJ won't disppoint USDJPY bulls

- MPC waits for Budget BoE review, stay short Cable

- SNB to stay on hold in the week ahead, watch USDCHF

- Norges Bank also to remain unchanged next week

- Australian jobs, RBNZ meeting should temper AUDNZD rally"

Mansoor Mohi-uddin, Managing Director &…

UBS - "This year we have been bearish on the yen and the pound's near term outlook. Over a three month timeframe we have projected declines to 95 and 1.53 against the dollar respectively. Recent events have resulted in these short run forecasts being met and suggest that the longer term picture will remain challenging. As a result we downgrade our end 2013 forecasts for both currencies. We now expect USDJPY to trade at 100 by the end of the year, compared to 85 previously, and for GBPUSD to…

Royal Bank of Scotland - "While we believe that GBP fundamentals have deteriorated further, and this will keep the pressure on GBP/USD, we do expect a kicker from a stronger USD tone from concerns over Italy. This may mean that EUR/GBP falls at the same time as GBP/USD falls. The USD part has led us to lower our assumed profile for GBP/USD. We now see GBP/USD moving into a 1.45-1.55 range, with risks skewed to the downside."

Royal Bank of Scotland - "The outlook for the GBP remains weak after a dovish speech by BoE’s Fisher and as BoE members in testimony reiterated the views discussed in the recent MPC meeting that they were prepared to take further measures to spur growth. The UK press reports that Deputy Governor Tucker discussed the possibility of charging banks for leaving cash on deposit at the central bank, which appears to mean targeting negative cash rates.

GBP continues to trade below a key…

JP Morgan - "The GBP/USD forecast profile has been changed to 1.50 for Q1, 1.47 for Q2, and 1.51 for Q3 and Q4. We would stress that it is sentiment that has turned rather than fundamentals – these were always negative even as GBP appreciated throughout the euro crisis. We expect further downward pressure on GBP, particularly as uncertainty around monetary and fiscal policy intensifies around the budget (March 20) and the change of BoE governor (July 1).

(...) The strong reversal right…

HSBC - "The UK has lost its AAA rating for the first time in its history, following the one notch downgrade by Moody's overnight. The implications for GBP are negative, the more pronounced impact likely to be evident when Asian markets reopen on Monday. We have previously highlighted the downgrade danger as one of the factors behind our bearish stance on GBP. We retain our 2013 year-end forecasts of 1.48 on GBP-USD and 0.91 on EUR-GBP.

(...) We started the year as one of the most bearish…

Royal Bank of Scotland - "GBP/USD A very important last week as the important support at 1.5300 is broken and fails to hold price action on a weekly close basis. This is significant and opens up further downside levels. My support level at 1.5300 failed to hold up price action; the level was convincingly broken and last week was the first weekly close below 1.5300 since July ’10! This changes the medium term picture quite dramatically and also now creates a ceiling at 1.5300 on the basis of…

Royal Bank of Scotland - "GBP was hit close to the end of last week with a Moodys downgrade from Aaa to Aa1. Even though hardly a surprise, the GBP remains weaker in early Asia trading. The key to sentiment this week will be how it trades through the open in European hours.

GBP/USD is trading below a region of previous support around 1.5230/1.5350 made over 2010/12. It closed below this region last week, dropping sharply on the Moodys announcement right near the end of the week's…

UBS - "The pound, like the yen recently, is undergoing a sharp devaluation against the other major currencies. Late on Friday, Moody's stripped the UK of its AAA rating citing continued weakness in Britain's medium term growth outlook. We remain bearish sterling and expect Cable to trade in a lower 1.40-1.50 range over the next couple of months.

Financial markets are set for a challenging week. (...) This week's key points for currencies are:

- Bernanke to be dovish but Fed hawks…

HSBC - "GBP has fallen quite sharply since the beginning of the year, but would seem to have further to go. The currency faces a toxic cocktail of declining fiscal credibility and monetary policy inaction just when market attention is shifting away from the Eurozone crisis and the US fiscal cliff. The fall in GBP so far, although swift, has been relatively modest in historic terms and it remains, if anything, above ‘fair value’ levels. The external accounts are weak and the market is not…

Rabobank - "So what does the future hold for GBP now? Clearly it has got off to a bad start in 2013 and it is only natural some are now saying it is oversold – a look at the daily RSI supports this view, although the weekly RSI is not yet in oversold territory. As we noted on Monday, GBP CFTC positioning has plunged into negative territory and net short positioning is at its strongest since June 2012. Although these factors may suggest a pullback could be forthcoming, the age old adage, ‘the…

UBS - "Sterling is likely to be the next major currency that depreciates strongly. This follows the plunge of the yen over the last few months. As central banks tolerate higher levels of inflation, the pound is set to weaken further across the board particularly against our favourite G4 currency, the US dollar. This week's key points are:

- watch FOMC minutes for signs of Fed easing fatigue

- Italian elections key for euro in the week ahead

- forget G20, Abe's BoJ choice to…

BBH - "Sterling made a new low for the move, to bring its loss against the dollar since January 2 to 5.6%. How much worse can the news get for the sterling?  It is not simply the retail sales report.  Most of the economic data has disappointed.  The economy remains stagnant or worse and fiscal policy remains pro-cyclical.  King says more monetary easing can be provided if needed.  Hello?  Where is the bar?  If it is not needed now, under what conditions would it be needed?  King welcomed…

UBS - "GBPUSD BEARISH Downward bias remains with the focus on 1.5694, ahead of 1.5394. The pair will find resistance at 1.5892.
USDCHF NEUTRAL Yesterday's session saw the pair test key support at 0.9197, a break below this would expose 0.9111. Resistance is at 0.9389.
USDCAD BULLISH Yesterday the pair broke below the support at 1.0021, ahead of 0.9904. But as the MACD stay above the zero line any losses are limited, with the significant resistance at 1.0136."

Societe Generale - "In the week ending Jan 15, the speculative community bought dollars and yen, sold Euros, according to CFTC data. The way EUR/USD has traded does suggest that positioning is gyrating pointlessly, with outright exposure fluctuating around zero. Economic weakness and a less dovish tone from the ECB, accompanied by a correction at the front end of the European bond markets, rather balance each other out, though we still expect the Euro to be stronger near term, and weaker…

UBS - "This week's key points for currencies are:

- dollar bears note FOMC has hawks as well as doves

- euro supported for now on global risk sentiment

- USDJPY still a buy on dips into January's BoJ meeting

- UK CPI, retail sales key in the week ahead for sterling

- EURCHF plays catch up at last with euro crosses

- expect NOKSEK to be bid as Swedish data stays mixed

- watch Australia's employment data in the week ahead"

Mansoor Mohi-uddin, Managing…

Deutsche Bank - "The pound's greatest flow strength could turn out to be its greatest weakness though. In contrast to Switzerland's steady inflow, the UK saw a 350bn GBP collapse in short-term flows in the first few years of the crisis, only to subsequently rebound as Eurozone tail risks picked up (chart 2). This could reflect outright inflows or liquidation of UK assets and hoarding in cash. We think this pattern puts sterling at major risk this year. First, we doubt this pace of…

The Euro is seen to gain opposite the British pound today as the European Central Bank is expected to keep interest rates on hold at a record low 0.75 percent as the Euro Zone economy shows some positive signs of stabilization and inflation remains above target. In contrast, disappointing trade figures from the UK are deemed to suggest that trade activity became a drag on the British economy in the fourth quarter.



Convening for the first time this year, the ECB is likely to leave…