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The dollar continued to come under pressure across the markets as more positive feedback from global markets spurred on the sentiment that the recession is nearing the end. Yesterday from the US we saw that industrial production and CPI data came in better than expected- industrial production up 0.8% following the previous days’ positive retail sales data. This has given the markets a comfort factor and lessened chatter on a double dip recession. EUR/USD continues to drive towards 1.48 and USD/JPY is pegged at 90.80; even the pound managed to gain up against the USD.

From the UK we had retail sales data and this came in as expected- although this was slightly disappointing for sterling we have not seen any further selling on the pound. Elsewhere, BOE quarterly survey shows Britain’s inflation expectations for the coming year holding steady at 2.4% in August, unchanged from May.

In other news the Bank of Japan and the Swiss national bank both left their interest rates unchanged as expected. Japan upgraded their outlook for the economy and in recent talk they have even moved away from discussing the problem of a stronger Yen. This is an interesting change in rhetoric as a strong Yen undoubtedly impacts on the economy of Japan as an export driven economy, however a stronger Yen will help to boost domestic demand and should actually help formulate a sustainable recovery.
The key levels to look out for today are centered around further USD weakness with 90 on USD/JPY a huge level; 1.48 on EUR/USD and 1.6650 for GBP/USD. The factors that could turn this seemingly relentless selling of dollars would be a pull back in equities or hawkish comments arising from the Fed.

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