The British pound touched a fresh low for 2008 overnight

The US dollar weakened against its European counterpart after weekly U.S. jobless claims rose. The number of U.S. workers filing new claims for unemployment rose to 516,000, the highest level since Sept. 11, 2001. In other news the U.S. trade balance showed that the deficit shrank more than expected in September, to $56.47 billion. The market will look towards tomorrow’s press conference from Fed. Chairman Ben Bernanke as he comments on the current US economy and the value of the dollar.

As analysts also await comments from regional Federal Reserve officials later today, look for the dollar to hold close to familiar ranges.

The euro rose against the dollar after the release of weak unemployment data out of the US. Look for the euro to hold on to its current gains ahead of tomorrow’s CPI release and ahead of a speech from European Central Bank President Jean Claude Trichet.

The British pound touched a fresh low for 2008 overnight as the market digested the possibility that the Bank of England could keep cutting rates, bringing its benchmark rate toward zero by next year. With its economy most likely already in a recession a weaker pound could help manufacturing and help to compensate CPI pressure.

The Japanese yen weakened after gaining ground in the previous trading session following intervention from the Reserve Bank of Australia. With risk aversion at the forefront of investors minds, look for the yen to regain support.

The Canadian dollar rose slightly against the greenback primarily on technical movement and despite oil dropping to 22 month lows under $55 a barrel. The market will look towards tomorrow’s survey of September manufacturing. Look for the loonie to remain under pressure as oil prices continue to drop coupled with concerns about a global recession.

The Australian dollar held its ground after falling sharply and after the Reserve Bank of Australia (RBA) intervened to support the currency. The global recession has cemented expectations that the RBA will cut rates again next month by as much as 100 basis points taking overnight rates to 4.25 percent. With commodity prices continuing to fall and with investors pulling out of the carry trade, look for the Aussie to remain under pressure.

The New Zealand dollar gained ground coming off of two-week lows assisted by the rise in the Aussie and after the Australian central bank intervention. In other news retail sales fell 0.9 percent, the third consecutive quarterly decline. Look for the Kiwi’s strength to remain short lived as markets continue to focus on a deepening recession.

The Mexican peso weakened as worries of a deep economic recession in the United States could push neighboring Mexico into recession. Look for the peso to remain weaker as the IPC stock index continues to be pressured along with investors focused on the prospect of a prolonged global recession.