The dollar fell across the board at the start of European trade after markets had bid up the greenback ahead of a speech by Greenspan yesterday. The single currency had fallen to one-month lows around $0.9110 in European trade on Thursday but is now hovering just below 93-cents. Markets reassessed the chances of a soft landing in the US after Greenspan gave a lackluster review of the US economy. The Fed Chairman spoke of a very dramatic slowdown and said the US would probably experience zero growth in the coming months. After his speech, the dollar edged lower and many analysts are now expecting a full 50 bps rate cut at the next FOMC meeting on January 31.

In other news, Bundesbank's Welteke says there is no pressure to cut rates even if the Fed lowers theirs by 50 bp. Moreover, he still thinks Germany can achieve 2001 growth of 2.75% and M3 is slowing down in response to last year's ECB rate hikes, signaling lower price risks. The euro broke resistance around 92.90 cents in early European trade and hit a high of 92.21, where there is major resistance seen around 93.20, the 61,8% Fibonacci retracement. The single currency also recovered from a 4-week low against the pound around 62.87 pence, rising to 63.45 in European trade.

Sterling fell against the euro but rose to a day's high of $1.4687, recovering from a 1.4% decline since the release of Wednesday's extremely dovish minutes of the latest BoE policy meeting. The pound stumbled after the announcement of lower than expected UK GDP growth this morning, but quickly recovered and followed the euro/dollar higher. Q4 GDP fell to 0.3%, below the 0.7% estimate. The UK's National Statistics blames the two-year low in economic growth on a contraction in industrial production, which was mainly caused by weaker oil and gas output. The 0.3% Q4 figure means the economy is up 2.4% from a year earlier, but is now growing at an annualized figure of around 1.3%. This is about half the rate it could grow at without threatening to push up inflation. With underlying inflation at just 2.0%, below the target 2.5%, a rate cut as soon as February seems likely. Cable has since returned to the 1.4640s, the same level as before the GDP figures were released. Resistance is seen around 1.4680, followed by 1.4710.

In an interview with the WSJ the new Treasury Secretary, O'Neill, said he did not much favor intervention but that there are exception to every rule, he said. He also indicated a change in the US stance toward Japan, but declared outright that he was in favor of a strong dollar. $/JPY fell to a session low of 116.37 at the open of European trade after failing to break resistance at around 116.90 in Asian trade. Yen bears were unable to push the currency lower after Japanese government figures on Friday showed Japan in the grip of deflation and stagnant consumption, with consumer prices posting the biggest decline on record in 2000 and retail sales in December down for the 45th month in a row. The dollar fell because markets had sent the dollar to a session high of 118.45 in US trade shortly before the Fed chairman's speech. Thereafter, as they digested Greenspan's somber evaluation of the slowing US economy, markets sold the dollar. $/JPY is currently hovering around 116.70s, buoyed by immediate support around 116.45. The dollar faces resistance at 117.00 yen followed by 117.20 and 117.80. Subsequent support is seen at 116.20 followed by 115.85, the 61.8% retracement of the 119.50-113.55 move.

Europe's main bourses are flat to weaker on Friday morning with the technology sector leading decliners. London's tech index traded more than 2 percent lower in mid-morning trade, with the blue chips also modestly weaker on the day. The FTSE is down about 0.5% while the DAX is down almost 1%. US markets look set for a negative start, Nasdaq futures are down 43 points, while the Dow is down 30.