(12:00 GMT -18/12/07)
The dollar continues to incline against major currencies, underpinned by expectations that the threat of rising inflation could prevent the Feds from cutting rates aggressively. The tensions in money markets and the fallout of the subprime mortgages all come in the face of a slowing US economy. However, investors are now keen to see the US housing data to see how the financial sector is coping with the credit squeeze.

There is definitely a dilemma between slowing US growth which is becoming more widespread and inflation risks expectations in which central banks are concerned about. This is the flow which is driving the market now and people are positioning ahead of it accordingly where a consolidation phase with a somewhat strong dollar is likely supporting the situation.

The euro continues to trade in a volatile matter recording at the hour of this report a high of 1.4416 and a low of 1.4366

The pound extended its losses against the US dollar as inflation is above the comfort zone supported by high energy and food prices and so lifted the prospect of further cuts in UK interest rates. Though the sterling pound fell, the UK inflation figures helped market sentiment. The office for national statistics said that the annual CPI inflation rate was 2.1% in November the same as in October but below analysts expectations for an acceleration to 2.2%. the Pound seems like is slightly gaining strength against the US dollar but still no clear direction to fetch a high of 2.0227 and a low of 2.0111 at the hour of this report.

Despite what the market is showing now, we suspect that the yen's appreciation is something investors should keep an eye on. The yen has always fuelled the bull market through carry trades where investors borrow low yielding currency to buy high yielding assets. However with the backdrop we witness now, a mix of judgments misguided investors thus negatively impacting markets pushing the pair to the upside to record a high of 113.52 and a low of 112.73. However it's only a matter of time