The U.S. economy is between a rock and a hard place, between a definite recession and a potential stagflation, and that’s clearly why the U.S. currency is falling against all the majors, and that’s why the Euro is now achieving like all new all time highs…but the question is why the Euro??!!

The answer can be very simple or very hard, basically the Euro area was the least to be affected so far by the credit crisis, and the best to handle it before it actually strikes, at the same time the transparent policy that Mr. Trichet and his fellas are practicing is what keeps consumer confidence relatively high, while staying at a hawkish stand at a 4% interest rate without having the eco0nomy falling a part is quiet an achievement, and that is mainly why the European currency is being the super star in the Forex market.

Yet, the hard part relies on the fact that we already started to see some signs of moderating growth in the Euro area, some signs of turn over in the ECB's stance on monetary policy, and as we are thinking that maybe the worst is behind us in the U.S. economy, maybe the worst is before us in the European economy!!!

I am just trying to display all the facts, but what I think is that the European economy is doing great, and that’s why the currency is having the edge all over the world, and that’s why even with such a high exchange rates for the Euro it's not harming the economy that bad, because a glamorous economy needs a shining currency so let it be…

Today we have inflation and growth data a head of Thursday's rate decision and press conference, where inflation measured by the PPI is expected to pick up real nice, while growth levels in the preliminary reading for the 4th quarter is expected to remain as is with no revisions whatsoever, at a 0.4% QoQ, and 2.3 annualized, those readings will build the base to speculate on Thursday's meeting.

While Dollar watchers are waiting for Mr. Bernanke speech in Florida, maybe they can find a straw to rescue the greenback from drowning…as for the Euro we expect that this wave will continue and new levels will be achieved unless something happened and turned off the hawkish stand that Mr. Trichet is stubbornly holding.