Consumer spending will remain strong in the first quarter following the final quarter of last year. Supporting this is improving employment and wages.

Domestic demand is incredibly resilient now. With consumers set to increase spending now that deflation concerns are fading, the Bank of Japan may raise rates by 25 basis points as soon as October.

Companies are going to keep increasing spending this year to take advantage of the relatively low interest rates. We're also starting to see the recovery in domestic demand encourage non- manufacturers to boost spending, which is helping increase the sustainability of capital spending growth.

The market generally believes that zero interest rates will continue for the next two or three months, but no one knows what will happen to Japanese interest rates going forward [beyond that].

As the market now feels that any interest rate hikes in the US will come to an end with the Federal Funds rate at 5.0 percent, the dollar is likely to remain exposed to downside risk.

Investors are focusing on the new home sales figures after housing starts were so strong. Strong numbers will surely raise expectations the Fed will lift rates, boosting the dollar.