By Nigel Hodges of Currency Solutions

So much for the credit crunch. What credit crunch? Certain sectors seem exempt - like Manchester City who is putting up £100 million-plus for the Brazilian superstar.

For the rest of us mortals, such sums are the stuff of unreality. The New Year optimism has faded as it appears we are going to start 2009 with...a deepening recession! After the worst summer on record, coldest winter and greatest recession since the 1930's, it's a wonder we managed to have any fun at all this year.

Risk aversion has returned to markets this week as weighty data from the US and Eurozone has confirmed deepening recession. The US Dollar and other safe havens have been supported by a flight to quality while the Australasian currencies have been left vulnerable by low risk appetite and commodity prices internationally.

The Euro has been suffering from the view that the ECB has been foot dragging when it comes to decisive monetary policy. The 0.5% reduction to the base rate this week did little to remedy this as it was largely in line with market expectations.