The last week's unexpected weakness in the labor market caused the USD to slump to a 15-year low against six of its most actively traded peers. Yesterday the USD was traded at 1.3808 against the EUR, which is only 0.4% below a record low of the 1.3852 reached in July 24th. The latest weak employment figures proved once again that the housing crisis hasn't been affecting the real estate sector only, but has expanded and now influences other markets as well. Given the circumstances, the Fed is highly expected to lower its benchmark rate by quarter of a point to 5% next week. Moreover, Federal Reserve Chairman Ben S. Bernanke, driven by the first drop in employment in four years, may even be forced to cut interest rates twice, reaching the 4.75% level in the fourth quarter of this year. There was no significant data released from the U.S yesterday, apart from a Consumer Credit index, which was released at a lower than expected figure of 7.5B, dragging the USD deeper into the bear's cave. Today, the most significant news coming out of the US will be the Trade Balance. The figure is expected to be released in negative territory at -59.0B, slightly lower than the previous month. Also today, the Fed's Chairman Bernanke will deliver a speech in Berlin where he is expected to drop clues on current monetary issues. Heavy market volatility is often experienced during Bernanke's speeches and today may not be different.

The European Central Bank, the Bank of England and the Bank of Japan held off from raising interest rates at their latest policy meetings as they awaited a clearer reading on how the economy was likely to cope with the turbulence. The GBP fell against the EUR and the global financial market turmoil will prevent the Bank of England from adding to three interest-rate increases this year, reducing the currency's yield advantage. Analysts claim that the EUR will maintain its strengthening against the USD and 1.4000 appears to be very close. The bottom line, the EUR seems to be an attractive investment alternative especially against the USD. There are two major news events expected to come from Europe today, the first one is the UK Trade Balance which is expected to maintain the -6.3B level, and the second one is the ECB President Trichet's Speech which will elaborate further on ECB future monetary policy.

The Japanese yen has appreciated over the past two months as risk aversion has led carry trades to unwind. The last week's unexpected weakness in the U.S labor market caused Asian equities to drop and triggered investors to sell high-yielding assets, thus further boosting the Yen. The USD/JPY dropped to a low of 112.60 and the GBP/JPY to 228.27 yesterday. There was no significant economic data released from Japan yesterday apart from the Core Machinery Orders with the headline figure releasing at 17.0%, beating expectations of 5.2%. Today is also expected to be void of data. Much of the market's attention will be focused on how the USD will move. Japanese markets are worried that the deterioration of the U.S. economy is worse than they had expected. The main fear is that the demand for Japanese exports could weaken as the U.S. economy. With carry trades unwinding, the JPY should continue to range trade at its high levels and we should see JPY fluctuations being dollar centered today.