The Dollar slumped against the major currencies early in the week due to order flows and a host of technical factors such as end of month profit-taking and speculative short-covering. The Dollar spent the rest of the week strengthening against the Euro, CHF & Yen but was unable to pare back losses versus the Cable and Aussie. Stronger than expected economic data out of the States continues to assist the greenback. However, given the strength of the data one can argue that the dollar should have performed better. As expected the ECB raised rates by 25 basis points but the Euro actually fell. The reason for the fall was when ECB President Trichet said during his press conference that there was no plan for further tightening. In Japan, loose monetary conditions relative to economic conditions is manifesting itself in a weak exchange rate and a strong stock market. The Pound was the big performer last week as it rallied strongly. A Bank of England policy maker said there was no rush to move UK interest. The Aussie shrugged off a worse than expected current account deficit to rally versus the dollar. Aussie continues to benefit from its yield advantage, strong base metals and gold which soared to 23 year highs.

Risks to global growth have shown no signs of materializing. This makes it difficult to come to anything other than a rather upbeat conclusion about the path of the global economy at present. Data releases out of the States and Eurozone is expected to reinforce healthy growth in the global economy.

Euro continues to trade in a volatile 1.1650 to 1.1850 range. The lack of follow-through on both ends has the market perplexed. A decisive break of 1.1680 would signal a test of the downside towards 1.1586, the 38.2% retracement of the broad 0.8227 to 0.3663 advance. A decisive break of the congestion zone at 1.1903 (Oct 3 low) to 1.1907 (50% retracement of 1.2170 to 1.1644) is required to put doubt in the ability of the short-term bear trend's ability to eventually post a new trend low.