January 2008 was a volatile month for financial markets. Global equity markets plunged on the announcement of further bank write-offs and on incoming data signaling the imminence of a US recession. The latest data from the US, Europe and abroad indicate that inflation is elevated and continues to rise despite weaker growth from US and Europe. If the market does shift its focus from growth to inflation later this year, the USD is expected to suffer. Once the market focus has turned to inflation, the USD is expected to come under renewed pressure until there are clear signs that a US recovery is in place.

Inflation
Securities markets