Has risk sentiment taken a significant turn for the better or is the dollar losing its status as a safe haven currency? This is the fundamental question for dollar traders and even to those market participants in other currencies and securities.

The Japanese yen could reverse recent gains next week as seasonal capital flows create the perception of a boost to risk appetite.

The outlook for the British pound looks dim as the Bank of England is widely anticipated to follow up their October 8 and November 6 rate cuts with yet another aggressive reduction on Thursday morning.

Volatility is extraordinarily high, not only in the currency market, but across all asset classes.  However, for the past four weeks, price action has come without trend and in some cases it has consolidated into tight ranges.  Something will have to give soon, and considering the fundamental environment, it will likely be congestion trends.

The vacillation in risk appetite has been constrained for most of November, but the steady rise in volatility and refocus on larger fundamental themes in the currency market promise breakouts and revived trends.

If four major central bank interest rate cuts and a truly dismal US employment report were unable to break the yen out of its recent channel, it is unclear that anything on the coming week’s economic calendar will be enough to elicit strong reactions from weary forex speculators.

The Bank of England cut rates by 150 bps ,surprising markets that were expecting a 50 bps reduction.

Both the stock market and higher yielding currencies gave back some gains after Barack Obama won the presidential election.

Event risk will be spread throughout the currency markets this week, with US services sector data and US non-farm payrolls likely to add to evidence that the country is facing recession, while rate decisions from the Bank of England and European Central Bank are forecasted to yield rate cuts.

The advanced GDP reading for the U.S. is expected to show that the economy contracted 0.5% in the third quarter. Economic activity has weakened significantly throughout the second half of the year as the effects of the fiscal stimulus checks abate, and conditions may only get worse as the jobless rate continues to rise.