The US dollar faces major event risk in coming days, especially as the Federal Reserve is expected to cut interest rates.

After falling nearly 6 percent last week and testing critical support at 1.2500, many are hoping that EUR/USD will finally turn higher soon.  However, Euro-zone economic releases will be working against that as nearly every report is forecasted to deteriorate.

The British pound fell to a five-year low as the Bank of England governor confirmed what markets already knew: the U.K. has entered a recession.

Event risk promises a volatile week for the British pound should risk trends give way to normal market operations when liquidity returns to the market.

Stock markets continued to rally this morning on speculation that actions taken by policy leaders to inject liquidity in the banking system will help to reinstate investor's confidence in global financial markets.

In a coordinated effort, the central banks of the major economies around the world have lower their respective benchmark interest as the credit crunch spreads throughout the global financial markets.

But stocks still fell more than 500 points.

European consumers expect prices to rise and unemployment to stay high, which could make them spend less in the last quarter of 2008.

This week the euro sold off against 11 of the world’s top 16 currencies by trading volume on speculation the ECB will have to lower interest rates to prevent the region from falling into a recession.

Equity markets around the world dropped the most since 1987 on speculation the U.S. Treasury will fail to restore investor’s confidence in the global banking system. Gains in the Japanese yen and losses in the stock market accelerated after the U.S. House of Representatives rejected a $700 billion plan to rescue the financial system.