US Dollar strengthened after continued problems in Europe

The continued problems in Europe, as well as fears of further fiscal tightening measures in Asian economies, have continued to affect risk appetite and strengthen the US Dollar.

Comments by Chinese Premier Wen Jiabao that China is considering further measures to deal with inflation have also helped pushed investors out of risky assets and put the brake on recent declines in the US Dollar.

The US Dollar has also been helped on its way by remarks by St. Louis Fed's James Bullard, that there is the possibility that the "Fed will not buy all $600bn under QE2" especially if the economy were to improve.

In Europe, Ireland continues to refuse to bow to EU pressure to accept a bailout, and cracks have already started to appear in the united Europe front of recent weeks. Austria's decision to withhold its portion of bail-out cash for Greece, saying that the Greeks haven't met their commitments to the EU on public finances, could be the beginning of the unravelling of the emergency bailout fund. Finland has also served notice that it is opposed to bailout cash for Ireland.

Yesterday's October CPI inflation figures for the UK not surprisingly came out above expectations, with year on year figures at 3.2%, a four month high, necessitating Governor Mervyn King having to write to the Chancellor explaining why the Bank of England has missed its inflation target again.

The release of Bank of England minutes today could well shed more light on the 7-1-1 split in the MPC and give a steer on how much uncertainty there is with respect to inflation prospects in the committee.

Unemployment data is also due out at the same time with expectations of a rise of 6k in October and an ILO rate of 7.7%.

Inflation prospects in the US will also be in the spotlight later in the afternoon with the release of their own CPI figures with an expectation of a Y/Y rise of 1.1% for October.