The initial market reaction following the expected rate cut by the ECB was positive for the euro

Despite 56,000 new US workers filing for unemployment benefits this week, the US dollar is largely unchanged following today’s data release as it is balanced with the expected 50 basis point rate cut out of the ECB which pressured the single currency.
With risk aversion the main driver in the market, moves should be relatively subdued today with no significant US economic data due out until Friday’s release of Michigan Sentiment, Industrial Production and Real Earnings. Trading will remain thin today as markets debate the next move for the ECB and how it will impact the single currency.

The initial market reaction following the expected rate cut by the ECB was positive for the euro as ECB President Jean-Claude Trichet left the door open for additional rate cuts signaling added stimulus for the economy. Trichet noted that inflation risk has diminished, but it may rise again in the second half of the year.
He also signaled that economic weakness should continue in coming quarters.
Within the past hour, the euro has reversed direction, falling to 5-week low in thin trading as economists look at the larger deepening recession.

The British pound remains supported following yesterday’s move by the British government who launched a scheme to help cash-strapped small firms.
Providing 20 billion pounds in lending to small business and a 75 million pound enterprise fund to invest in firms needing equity, investors are please by the supportive measures. However, continued banking sector woes from Barclays and HSBC and climbing unemployment are keeping gains limited.

Benefiting from the extreme aversion to risk in markets right now, the Japanese yen continues to maintain its strength, as investors move out of the tumbling Nikkei, which fell nearly 5%, in favor of the yen.
The yen has been benefitting in recent months from a safe haven status as the rest of the global is rocked by financial and banking strife.
The yen fell briefly after government data showed Japanese core private-sector machinery orders fell a record 16.2% in November from the previous month.

The Canadian dollar plummeted to its lowest level in over a month as lower oil prices pressure the currency. Canada is a major oil producer and exporter, and movements in the price of crude and other commodities often sway the Canadian currency. Oil has fallen from a peak price above $147 a barrel reached last July.
The Canadian currency has weakened in recent sessions following a string of sullen economic data and reports. The Conference Board of Canada on Wednesday that said Canada's economy will stay in a recession for three quarters and contract 0.5 percent annually in 2009 with the jobless rate peaking at 8.1%.

The Australian dollar briefly dropped to a one-month low against the dollar and the yen after data showed a steep drop in full-time jobs and a rise in the jobless rate last month, reinforcing the case for further rate cuts.
Market expectation is for Australia's central bank to cut rates by 75 basis points at it next meeting on Feb. 3 as rising unemployment further hits growth by cutting business and household consumption and investments.