(21/12/2007 7:30GMT) Rate differentials are once again creeping their way into the market as currencies are now locking their future and sanity is somewhat reappearing as efforts to ease tight liquidity seems be working.

The dollar is gaining ground as expectations of another rate cut to be seen by the feds would most probably be prolonged as we see inflationary readings inclining especially the feds favorite PCE.

The European star remains the currency backed by sustained growth and massive efforts by their transparent policy to prevent the global subprime crisis from dampening much their growth levels. Inflation remains of concern of the ECB as it leaped quite well their comfort zone; nevertheless the currency remains the strongest with most stability as the ECB remains hawkish and cautious about their future. The pair started the day heading to the upside setting the highest at 1.4410 rising from the low recorded in early trading hours at 1.4315.

The royal currency is weakening further and further especially after breaching the major level at the 2.0000 dollars barrier. That was mainly driven by the minutes of the BoE's December 6 meeting of the surprise cut in which the MPC was clearly dovish as we expect more easing to come as the economy slows. The pair fluctuated in a narrow range opening to record the lowest at 1.9821 heading slightly to the upside then setting the highest at 1.9893.

The Japanese currency remains the weakest among all with the lowest yield and expectations are now for the Japanese economy to slow we may never seen any tightening in Japan as 0.50% seems their Everest. Adding to that the pressure on the currency from investment strategies, which is according to risk appetite making it vulnerable to change with carry trades and their reversals. Until the hour of this report the pair recorded a high of 113.26 and a low of 112.93.