EUR/USD - Euro Dollar, American Session - 10/10/08 EUR/USD - 1.3609 Daily Market Outlook - Oct 10 EUR/USD Technical Analysis 10 October 2008 More EUR/USD GBP/USD - British Pound Dollar, American Session - 10/10/08 Shock and Awe for Markets All Around the World! GBP/USD Technical Analysis 10 October 2008 More GBP/USD USD/CHF - Dollar Swiss Franc, American Session - 10/10/08 USD/CHF - Dollar Swiss Franc, European Session - 10/10/08 USD/CHF - Dollar Swiss Franc, American Session - 09/10/08 More USD/CHF

It was a wild week in the Forex markets as two of the largest central bank leaders, Bernanke and Trichet, crossed paths momentarily with their views on interest rates and inflation, with the ECB winning out at the end.

Early in the week, the Euro plunged after Fed Chairman Bernanke said the central bank was "attentive" to the level of the U.S. Dollar.

Traders immediately read this as a sign that the Fed was through cutting interest rates. The Fed Chairman, who rarely comments on matters regarding the Dollar, also emphasized that the Fed was aware of the effect a weaker Dollar had on rising crude oil prices and inflation. The Chairman also indicated that the Fed was working with the Treasury on this matter. Prior to Bernankes comments, Treasury Secretary Henry Paulson went on record backing a stronger Dollar.

On Thursday, the European Central Bank made the decision to leave interest rates unchanged at 4%. This was not actually news as the market had been expecting this announcement. What the market was not prepared for was the excessively hawkish comments from European Central Bank President Jean Claude Trichet.

After the announcement, Trichet came out firing and said an interest rate increase in July was "possible." This comment caused immediate short covering as traders were forced to cover new shorts placed earlier in the week. All the gains caused by the Bernanke comments were erased.

Early Friday many EUR/USD traders were evening there positions and licking their wounds ahead of the U.S. unemployment number expecting the market to remain range bound or slightly lower over the near term. Many felt that the Bernanke/Trichet comments negated each other and that the market would trade somewhere between the all-time high at 1.601 and the May low at 1.5283.

Friday's non-farm payroll number came out as expected, but the jump in the unemployment rate from 5% to 5.5% was too much for Dollar bulls to handle despite the many ways the media tried to explain how the government came up with that number.

The government's report showed the U.S. unemployment rate increased the most since 1986, adding to speculation that the economy may not be rebounding as anticipated. The financial markets in Chicago almost immediately lowered the odds of a rate cut in December from 78% to 64%.

This action caused interest rates to drop making the differential widen in 2-year notes versus the equivalent Bund, to a difference not seen in 15 years. Near the close this spread differential was at about 2.25 percent. Clearly, the markets were pricing in a possible rate hike in the Euro Zone while lowering the odds of a rate hike in the U.S.

The Dollar plunged on the news as shorts covered positions in the Euro. Adding to the Euro's bullishness later in the morning were comments from ECB executive board member Lorenzo Bini Smaghi who said in Venice that there is "broad consensus" that a interest rate increase may be necessary next month.