The U.S. Dollar weakened against most major currencies following the release of the Initial Claims Report. The Japanese Yen fell on the news. Look for pressure on this currency if equity markets continue to rally. Demand for commodity-linked currencies is expected to be strong as traders seek higher returns from riskier assets. The European Central Bank left its benchmark interest rate at a historically low 1% as expected, but the key to today’s Euro movement will be what comes out of the mouth of ECB President Trichet. Trichet is expected to address two key issues: the extension of liquidity support and his opinion on the European bank stress tests. As it currently stands, the current ECB stimulus program is set to expire in October. Investors are looking at the possibility of an extension of this program due to the negative effect the Greek sovereign debt crisis has had on the Euro Zone economy. Investors are also looking for Trichet’s opinion on the on-going bank stress tests. They are looking for Trichet to say that he believes the tests will be stringent enough to restore investor confidence. The GBP USD is trading lower, but trying to recover following the U.S. Initial Claims Report. Technically this market is struggling to break out over the last main top at 1.5228. Earlier this morning the Bank of England voted to leave interest rates unchanged at the record low of 0.5 percent. No one actually expected them to hike rates because of the recently announced austerity measures. At a time when a government is slashing spending and threatening to raise taxes, it is necessary for the central bank to continue to keep interest rates low and provide the liquidity when necessary. One concern for British Pound investors is high inflation, but this morning’s action by the BoE indicates that the majority of its members chose to fight against a double-dip recession rather than high inflation. One member of the BoE policy committee actually voted to hike interest rates but was overridden by the majority. Today’s early weakness in the Sterling can be attributed in part to the on-going conflict between those who fear inflation and those who fear a decline in the economy. The latter’s case was bolstered overnight when it was reported that the average house price in the U.K. fell by 0.6% in June for the third consecutive month. Although U.K. manufacturing sector data should its fastest annual growth in more than 15 years, this news was largely ignored by investors who felt it was just an offset of huge losses suffered during the height of the recession last year.

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