(07:30 GMT - 05/12/07)
Confidence in the US economy continues to drop heavily with expectations of a growing recession as the economy is doing poorly according to examined surveys. The caused of such deterioration are the higher energy costs, the weakening dollar of course and the fallout from the sub prime mortgage crises.

The calendar today is full with data injected into the market from all major economies however the center of attention is yet to come tomorrow as markets are awaiting for the ECB and BOE rate decision. The Euro is trading within narrow ranges since early this morning after it opened at 1.4763 to record a high of 1.4770 and a low of 1.4724.

UK consumers also seem to lose confidence in their economy as higher borrowing costs accompanied by rising prices depresses spending. The sterling is under pressure because the financial turbulence is filtering through the UK economy. According to analysts and economists, we expect the BOE's Monetary Policy Committee to leave rates steady at 5.75 however some predict a quarter-point reduction. The Pound is also trading within narrow ranges today to record a high of 2.0609 and a low of 2.0480.

Policy makers in the US and Europe are putting effort and work to stem the spread of the subprime loan losses, for that the currency which seems to be in harm is the Yen as it reacted accordingly by showing a gradual drop against all the world's 16 most-actively traded currencies pushing the USD/JPY to record a high of 110.68 and a low of 109.76. Carry trades seems to take control over the Yen as investors bought higher-yielding assets funded by loans from Japan pushing the Japanese currency to the downside. Increasing appetite for riskier investments like carry trades is what we see here. In carry trades, investors borrow with low borrowing costs ad invest in countries with higher interest rates, earning of course the difference between the two. Rates in Japan is 0.5% compared with the 10.5% in South Africa and 5% in South Korea, you do the math.