The Q4 2008 earnings season kicked off this week with Alcoa being the first DOW component to report a wider-than-expected loss in its closing bell announcement yesterday. Alcoa's poor showing yesterday was followed by a broad decline in financial stocks as news the Obama administration may restrict financial firm's access to government funds. Citigroup fell 18% along with this news as they announced a brokerage merger with Morgan Stanley that could see the light this week. In other developments President Elect Obama urges outgoing President Bush to ask congress for the remaining $350Bn TARP funds. Bernanke to speak on crisis policy reponse at the London School of Economics at 13:00GMT.

Former fed governor Frederic Mishkin wrote in an article in the FT that the U.S should and would benefit from setting an inflation target because it would make it easier to drain liquidity later. Mishkin's comments have the financial and economic world buzzing as they weigh the fundamentals of such a move. This would make the government's policy makers more credible in their actions by putting a cap on how long they are willing to let current monetary policy define the U.S economy and exacerbate the already generous budget deficit – this would in essence put a timetable on the U.S' path to recovery. This and the recent rise in the non-Fed enhanced commercial paper market should be supportive of the dollar in the near to medium term as we target 1.2850.

The Euro continues to dwindle in the depths of poor industrial numbers as Germany remains soft in its manufacturing sector, largely brought on by the slump in the Auto-sector. Greece, Ireland and now Spain have all been warned by the S&P that their credit rating is at risk – this only highlights the risk and the declining attractiveness of EUR-denominated assets.

The dollar posted yet again broad gains against most currencies bar the Yen as both safe-haven currencies of the day rise on continued risk aversion. The Yen gained 0.17% against the dollar, while the greenback managed +0.8% against the Euro, +0.5% against the Swiss-Franc and +1.38% against the Sterling. Today's EURGBP chart shows a 3-month look at a cross that culminated at 0.9809 on the 30 of December (highest ever) and is now well into its counter-trend. Initial Elliot wave analysis would suggest that the counter trend could well be over and is ripe for the picking. However further pressure on the pair could be true if European industrial worries and further deep recession fears persist – Sterling being concerted could put it at an advantage.