All eyes are riveted on the ECB announcement today, many expecting a 50bp cut on the back of continued weakness in global demand. German manufacturing sector has continued to weaken to levels which are already inconsistent with the latest growth projections. The S&P reduced Greece's sovereign credit rating and placed Ireland, Spain and now Portugal's credit ratings under review. Furthermore the unconfirmed news that Ireland was seeking IMF aid was staunchly refuted by both parties only fed the already dismal sentiment on the state of the European economy on a whole. The Euro continues to be under pressure as the EURUSD traded as low as 1.3094 yesterday before recovering somewhat – despite lackluster news from the U.S.

Many large banks in the Euro-zone are suffering large declines in their stock as they report large Q4 losses. The earnings season has not only taken it's toll on their stock, but many banks are now bringing attention to themselves as if they were in dire need of further governments funds – in the U.S the story is much the same. Yesterday Deutsche Bank, HSBC and Barclays all suffered large declines, Barclays losing as much as 14.5.

U.S Retail sales missed the consensus of -1.2% and came out at -2.7% while the Beige book reported dismal yet less gloomy than the previous release. In other developments, Citi Group announces it will give up its current business model as it merges its Brokerage operations with Morgan Stanley. Comments by JP Morgan Chase' CEO Jamie Dimon that the worse of this recession was still to come didn't bode well with those optimists that feel 2009 is the year of the recovery.

Japan's Nikkei took a big hit today as the Japanese machinery orders fell the most in 21 years – contracting 16.2% from October. The decline was the largest since the data was first compiled in 1987 – the news brought the Yen 30 pips lower against the dollar, but the continued decoupling of the Yen against other currencies saw that Yen fight back and managing to gain 0.3% against the dollar since yesterday.

While the dollar's performance yesterday was mixed against various currencies it still managed to gain against many currencies despite the un-relenting spell of bad data from U.S Equities. We expect the dollar to continue to gain in the near and medium term as risk aversion and repatriation continues to be the central themes to the greenback's price action of late.