(07/01/2008 - 11:30 GMT)The debate now is whether the U.S. economy is heading into a recession or into a state of stagflation. It is assured that no matter what happens it will not be good. And the chance to see a rate cut by the Fed's has increased to 54% from only 25% prior the release of the abysmal job's report. All hopes were on the labor market as it was the only sector supporting the economy after the massive revisions seen but that has now been stripped away as it plummeted.

The dollar rebounded against the majors but that was only because it was the beginning of the New Year and analysts say that the losses seen by the dollar were just too excessive. Higher oil prices are still posing a threat on global inflationary risks as the Euro Zone also released its PPI figures for the month of November showing continuous upside risks to price stability as well. With the ECB rate decision later this week, Mr. Trichet's speech due later today might give hints to what exactly will happen depending on how dovish or hawkish he stands. The Euro has been declining since the early morning as markets await for the ECB President and is now currently fluctuating around the 1.4670s. The high for today remains at 1.4756 while the low is 1.4658.

Similar to the ECB, the BoE rate decision will be due on the same day as the ECB where expectations show that the MPC will hold their rates steady after they surprisingly cut benchmark interest rates in their last meeting. With fundamentals coming out concerning the fourth quarter showing somewhat positive readings, the unexpected cut in rates I believe was just a precautionary step to save the economy from the damaged housing sector and avoid following the same footsteps the Feds had once took. The royal currency is now fluctuating around 1.9715 failing to breach the strong resistance level at 1.9720. However, if it was able to pass it then the sterling might initiate an upside trend. As for the EUR/GBP cross, the pair has depreciated taking it down from the historical records the Euro has been recording. The pound recorded a high of 1.9753 in the early morning transactions and a low of 1.9652 up to the hour of this report.

The Japanese yen continues to decline against the dollar as it somewhat was able to gather strength from what could be called New Year transactions. The pair soared to record a new high for the day at 109.72 after the previously recorded low in the opening transactions of the session at 108.52.