The sell-off for commodities is ongoing and risk aversion is dominant with the yen striking more gains while the dollar holds first with the euro steady ahead of Trichet.

We can see the market sentiment still shaky ahead of the rate decision in Europe and also the jobless claims numbers for tomorrow's payrolls figures. The market is mixed between monetary tightening and signs of slowing recovery and the market await the confirmation before the week comes to an end.

The dollar held low with the euro consolidating its gains with investors turning their focus towards Trichet's rhetoric today. The dollar index is trading with an upside bias for now and turning higher from the low of 72.80 but still below opening levels and intraday high at 73.19 and now hovering around 73.05.

We can see the euro turning lower at this time and marginally trending lower to opening levels and trading at 1.4830 after striking the high of 1.4898 and above the low at 1.4805. Germany reported abysmal factory orders that struck a sensitive cord in the market with fears over slowing recovery, especially with the ongoing developments across nations from geopolitical tension to natural disasters.

The euro is consolidating the gains till after the rate decision. The ECB will leave rates at 1.25% and the market awaits Trichet to finalize the course for tightening whether it is as rapid and as quick as June, with the words strong vigilance or will the bank say inflation pressures remain and stave off speculation till July.

The bets are more on July than June and accordingly with no vigilance we expect the euro to turn strongly south.

As for sterling, the pound recovered off the low at 1.6452 to trade slightly bullish now around 1.6494 off the high at 1.6542. The strong drop in services activity in April pressured sterling south with the decision today taken for granted at 0.5% with steady APF at 200 billion.

The pound has been racing on the back of the dollar weakness and the focus on the monetary stance, which kept the pound floating with gains. Nevertheless, with more slowing signs from the UK economy and King's evident bias to the loose monetary policy, the pound will likely be surrendering some of the gains as the market turns pessimistic and focus on slowing growth especially with tomorrow's non-farm payrolls and if they indeed come weak below expectations.

As for the Japanese yen, the story is again the same; risk aversion has held the yen high and took it to trade less than 80 levels again for the first time since the intervention. The USD/JPY moved to the low of 79.79 from the high of 80.68 and currently hovering around 79.90.

The yen is trading strong and appreciated as much as 1.0% to below the 80 marginal level for the BoJ for the first time since the March 18 coordinated central banks intervention.

We can see the volatility extended with the eyes on the Euro and Trichet's rhetoric and from the other side on the dollar and the jobless claims whether the figures will feed the downbeat sentiment on payrolls tomorrow further that might increase further the volatility and risk aversion with the yen surging and the dollar possibly higher if Trichet disappointed as most likely for the scenario.