The Bank of England is expected to keep its benchmark interest rate unchanged at its upcoming policy meeting, amidst concerns of rising inflation.

This week, a slew of inflation reports will be released from the US, UK, Euro-zone, New Zealand, and Canada and the news is likely to spark volatility for each country’s respective currency upon release.

Many traders and analysts have taken advantage of the growing correlation between asset classes to forecast movements in one market by analyzing the changes in another.

Rising risk aversion paired with slowing inflationary pressures heightened US dollar volatility as it swayed throughout the trading session.

The US dollar picked up very slightly against most of the major currencies as Q4 GDP figures were finalized in line with expectations and personal consumption was revised higher.

Investors swarmed into higher yielding assets after the sell-off in the commodities last week, and pushed the strengthening dollar further away from last weeks record lows.

Investor sentiment soured further as more problems from the credit crunch continue to emerge, and pushed the US dollar to new record lows.

The Fed turned to a proactive approach to aid the fading economy as they offered to lend up to $200B in treasuries to financial institutions in exchange for debt.

Heading into Friday’s release, official and speculative forecasts have clearly taken diverging paths.