The non-farm payroll report for December showed a loss of 524k jobs. The unemployment rate increased to 7.2 percent from 6.8 percent.

The US Dollar reacted with definite strength. Market participants had initially expected the numbers to be far worse. Dollar traders expressed relief as numbers came in better than expected.

The Dollar Index continues to look stable and bullish. Barring any special surprises traders should see dollar strength throughout the rest of January.

The Bank of England slashed interest rates further by 50 basis points for January. The overnight rate on the pound is now 1.5 percent and likely to head lower in 2009.

This is yet another installment in the race to zero percent interest rates globally. The Bank of England expects to undershoot it’s 2 percent inflation target for the medium term.

The immediate reaction of the pound was very positive. Nothing has truly changed fundamentally, the central banks are still catching up to the shock of the global shake up. The pound is likely to continue to range for now.

The currency markets are back in full swing and they started off the new year with a roar. The US Dollar rallied hard on this first Monday of 2009. It seems that trading desk are once again full staffed and the first vote of the year for currencies seems to be in favor of the US Dollar.

It’s interesting to see the dollar rally after all the bailout news that happened just before the holidays hit full swing in the US. Amidst dismal news about retail and auto sales for the past few months, the dollar seems to rally in the face of everything, specifically bad news. Perhaps traders feel like the worst is out of the way.

On the US Dollar Index, the dollar seems to be approaching a strong resistance point on the 4 hour chart. It will be interesting to see if the dollar clears that hurdle and truly makes it’s way upward for 2009. The inauguration is 2 and a half weeks away, bailouts are slowly fading from the news (since there is no one left to bailout except the taxpayer), this could get very interesting in the next few weeks. Stay tuned.