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The GBP/USD fluctuated heavily with the start of the week on risk aversion and a strong dollar that kept the pair biased to the downside.

The volatility remains high for sterling with investors avoiding any risk especially with the vulnerability of the UK in particular to the worsening status in the euro area and risk of the spreading debt crisis. The currency also remained weak with the risk aversion supporting the dollar as investors saw the EU summit did nothing to end the crisis and Moody’s warning for downgrades intensified the jitters.

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Tuesday will be more volatile for the pair and trading is likely to remain biased to the downside ahead of the FOMC decision where the feds are likely to keep their policy unchanged and with the rates to be held at the record low range near zero. Nevertheless, any signal from the Feds that they are ready to take new decisions to support the economy or even QE that might support the sentiment and accordingly weaken the dollar accordingly yet overall the bias for the pair remains to the downside still.

CPI and RPI data will grab attention at 09:30 GMT where expectations refer to decline in CPI annual reading for Nov. to 4.8% from the prior 5.0%. The data is predicted to have an impact on the pair if it came much higher or lower than forecasts.

The United States will join the session at 13:30 GMT with the retail sales index for November, where the advance retail sales index could have expanded by 0.6% from 0.5%, while the retail sales less Autos index could have advanced by 0.5% from 0.6%.

At 15:00 GMT the United States will provide the business inventories index for October, which could have improved 0.4% from the previous steady reading.

At 19:15 GMT the Federal Open Market Committee (FOMC) will announce the rate decision (DEC 13), with expectations the Federal Bank could have left rates unchanged at 0.25%.

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