The US Dollar continued to be pressured as we start another week of trading, despite some encouraging signs from the labor market in last Friday's Non-Farm Payroll Report.

The main culprits in the Dollar's weakness are surging oil prices as well as the prospect for a sustained period of low interest rates which puts the USD at a disadvantage against the other major currencies where central banks are gearing up for interest rate increases in order to tackle inflation.

The EUR/USD pair moved to a fresh 4-month high at the 1.4035 level on this theme, though the pair gave up its loftier gains as NY trading got underway. Last week the ECB signaled that it is likely to raise rates in the following meeting. That continues to stretch out the rate differential in favor of the Euro.

Over the weekend the fighting in Libya intensified as rebels and Qaddafi's forces attacked and counter-attacked each other. The instability in the region and the prospect of continued fighting kept oil markets on edge, with US light crude moving above $106 a barrel. The prospect of an oil price shock can seriously cut into the US economy, as higher prices at the gas pump will sap consumer confidence and take away discretionary income from American households.

The safe haven flows that traditionally flow to the US during times of political instability are instead going to our 2 other safe-haven currencies - the CHF and JPY.

A combination of the interest rate outlook and higher oil prices are the major theme to start this week's trading. The only thing that can hamper the EUR/USD rise is a resurgence of the sovereign debt worries, but even a downgrade of Greek debt by Moody's only worked to pare the gains for the Euro from overnight.