Where to start with the week’s news from the States and the current plight of the Dollar? To paint the picture, the beginning of last week first saw a plunge in EUR USD down to the 1.435 mark but later saw a vertical surge up to 1.477 by the open of European trading on Friday. The swings in the middle were bewildering and no doubt heart stopping in certain quarters!

Further to the Martin Luther King Holiday last Monday, global equity markets bottomed out. The Federal Reserve faced the very real prospect of the Dow index loosing 1000 points in a day. The result; a shock to the market inter meeting interest rate slash of ¾ of a point, bringing Fed rate down to 3.5%. Only once in the last 25 years has the Fed cut by ¾ of a point and that was in the boom bust era of the mid eighties.

The effect however has been seen as overwhelmingly positive, with global markets, not just the Dow, recovering many of the losses that came on so quickly on Tuesday. The effect on currencies however was as mentioned earlier unpredictable to say the least with the widest daily spreads between the highs and the lows of the day that have been seen for some time. Indeed there is still the possibility for further rate cuts from the States this week, meaning we could see a 100 basis points decline in one month; a factor that is sure to weigh on the greenback in the long run.