Thursday 6th March

The US dollar continues to weaken. Currently it is holding near a fresh record low against the Euro as data yesterday showed weakness in the US service sector and employment keeping alive fears that the US economy may tumble into recession. The fresh data supports the slim hope that the Fed will cut rates by as much as 75bp on March 18th. Meanwhile commodity prices continue to rise with crude oil touching a record $105 per barrel and the inflationary pressures from these price rises will further compound the problems facing the US central bank.

For now the Fed appears to be allowing inflation concerns to take a back-seat to growth but at some point the US is setting itself up for an inflation problem. The lower USD will be aiding growth though in the long run and it's interesting to see the DJIA currently up (futures) some 350 points from Tuesday's lows.