The dollar clawed up from a near record low against the euro as markets reopened following Thanksgiving holidays in the US and Japan. In the absence of any key data, trading in currencies will stay entrenched in recent ranges with investors likely to wait for data due out before adopting fresh FX positions.

GBP

The outlook for the pound continues to deteriorate by the day. Third quarter GDP was weaker than expected and the weak housing market with BBA mortgage approvals falling to a record low. This prompted BoE member Lomax to warn that monetary policy may be restrictive which suggest that rate cuts are on the minds of UK policy makers.

USD

On Friday the dollar fell to a new record low against the euro. US fundamentals have not changed; therefore the latest wave of dollar weakness was triggered more by lack of liquidity in the markets. Consumer spending is the backbone of the US economy, if spending is strong in the holiday shopping season, then the Fed may not need to lower interest rates, however, market expectations still indicate that the Fed will need to lower the base rate to control the dollar decline following the credit crunch.

EUR

European officials have increasingly expressed concern about the euro's rapid rise and the potential drag on exports. The pressure is mounting on Jean-Claude Trichet to do something about the growing euro's strength, however, his reluctance to do so reflects what must be very strong inflationary pressure.

JPY

Although we saw a post Thanksgiving rally, the yen continued to remain weak against major crosses.