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Another leg lower in oil and world stock markets caused the U.S. dollar to be tugged in opposing directions, though it was mostly weaker. Oil deepened its descent, falling 3% to new 12-year lows under $28. Coupled with a weakening Chinese economy, the big fear is that sliding oil prices could do the same to inflation, raising the risk of economy-choking deflation taking hold around the world. America’s dollar tumbled nearly a percent to one-year lows against the yen, a popular refuge when global risks rise. The euro steadied against the dollar, finding little support from the latest market upheaval as cautioned reigned on the eve of the European Central Bank’s first decision of the year on Thursday. Currencies from Britain, Canada and Australia all tumbled to new multiyear lows against the greenback. The Bank of Canada’s interest rate decision today at 10 a.m. ET could fan further volatility for the loonie.

EUR

The euro found little support from the latest legs lower in oil and global stocks, sidelined a bit on uncertainty over the outcome of tomorrow’s ECB meeting. After setting the FX world ablaze last month and lighting a fire under the euro, which amounted to its best single-day performance in six years, a surge of more than 3 percent against the dollar, consensus forecasts call for the ECB to hold fire on new steps to boost growth. The rout in oil to below $30 from above $40 when the ECB let met in December risks sounding the inflation alarms, potentially resulting on an increased chance of another round of economy-boosting, euro-weakening stimulus in the months ahead.

GBP

Sterling slid to new lows against the dollar, its weakest in about seven years, hurt by talk this week from Britain’s central bank governor who reinforced an outlook of low interest rates for a long time yet. Mixed news on Britain’s job market offered little support to the falling pound. The nation’s jobless rate unexpectedly improved, falling a notch to 5.1 percent, the lowest in nearly a decade. But wage growth slowed, showing consumers are ill equipped to endure higher borrowing rates anytime soon.

AUD

Like the U.K. pound, the Aussie dollar flirted with seven-year lows against its U.S. peer, weighed down by festering concerns about China whose stock market fell 1 percent overnight while its economy grew at the slowest rate in a quarter century last year, which bodes poorly for Chinese appetite for Australia’s commodity exports.

CAD

Ahead of what’s considered a close call for Canada’s central bank today about whether to trim its base rate from 0.50 percent, the loonie slipped to fresh 13-year lows. A rate cut would help Canada’s economy better weather the steady slide in oil. But lower rates would risk intensifying the loonie’s collapse, something that squeezes profits for Canadian companies whose U.S. counterparts seek to benefit from the exchange rate and demand cheaper prices. Until oil stabilizes, the loonie would be at risk of deepening its decline.

USD

The dollar kept on a generally weaker footing as today’s U.S. data added to scaled back expectations for Fed rate hikes this year. Annual inflation rose 0.7 percent in December from 0.5 percent, a tame level that does nothing to hasten the Fed to act. News today on housing was also subdued with both housing starts and building permits down. A big negative for the dollar is the fall in U.S. Treasury yields with the 10-year under 2 percent, a sign of waning confidence in the Fed raising rates this year.

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