Currency pairs remained locked in recent ranges in the New York session, with the dollar drifting lower on a strong headline CPI report but nonthreatening core figure.

Also worth noting was the resignation of Fed Vice Chairman Ferguson, effective at the end of April. Ferguson’s resignation will allow for President Bush to decide on the vice-chairman, thus leaving only Bush appointed Board members at the Fed.

Consumer prices outpaced forecasts, with CPI rising by 0.7% in January – a sharp contrast to the 0.1% decline in December.

The core-index was in line with expectations, rising 0.2%, adding onto last month’s 0.2% gain. Annually, CPI was up 4% from the previous year, while the core figure was up 2.1%.

The trend in consumer prices will likely be closely watched given the Fed’s vigilance to continuing upside risks to inflation.