As we are getting closer to the G8 meeting which will take place in Italy, the markets are in a wait and see mode, as economic conditions don€™t show any real signs of improvement and economic numbers from world indexes continue to disappoint. The markets were trading mixed yesterday, with Europe and Asia down due to return of risk aversion and New York trading on positive note, amid better than expected Manufacturing numbers out of US, which also helped the euro and pound rise, after a really bad performance.

The EUR/USD did not manage to break important 1.40 as yet, as the dollar fights against time for domination lately and therefore making the euro weak on the process. For now, the pair seems to be trading within tight ranges of 1.39-1.40; however a clear break of the latter levels may set things in motion for the next possible target. The failure of the pair to break 1.40 for one more time is negative for the euro for now; however let€™s see how markets will react after the New York open.

The economic calendar has not got many important releases today, with Manufacturing Production and Factory orders out of UK and Euro zone, which both expected to show improvement. Traders are not really paying much attention on the news currently, as the main events they await are the G8 meeting which starts tomorrow and also the BOE monetary policy meeting which once again will shed some light on what the banks plans are for the near future. The UK government announced last weekend that the recession has deepen further and the latest housing numbers shows that contraction still persists, making the investors think twice about buying the pound and staying in for long term. The UK economy although has shown improvement over the course of the last few weeks, nevertheless still suffers from high unemployment and bad earnings and the instability and uncertainty of the current government are not helping the matters.

The pound is weak against the euro, as seen in EUR/GBP and the pair looks good for further gains towards 0.88 in the coming days. Market participants know that the bank won€™t do something to alter the current record low rates; however they are waiting for the magic words of recovery in the economy before they commit.

Stocks are slightly down this morning, with a possibility of US futures trading lower later on, as traders are getting ready for the coming events. The oil has lost over 5% lately, on worries that recession is not over and demand is low, and also the recent scandal of PVM with the fraud allegations still fresh in trader€™s minds. The oil has to keep important $60 support for now, if further upside is to be seen, and if the dollar continues to strengthen, we may see a breakout of the recent $60-$70 range.

Lets see how the day progresses and if the dollar will manage to dominate for another day in light of the G8 meeting, as traders may want to exit riskier trades in case risk aversion hits us once again€¦