By Nigel Hodges of Currency Solutions

As the price of staple groceries soared by more than a fifth, up £1,100 on July last year and UK estate agents report lowest property sales in 30 years, one couple seemed blissfully unaware of how much of the rest of the world is gradually sliding into the pit of recession.

In a record breaking deal, photos of the new Brangelina twins will net the uber-couple an astounding $11 million dollars, although in a gesture of infinite generosity and continuing their commitment to world improvement, Angelina and Brad will hand $5 million of it over to charity (the rest is needed for childcare assistance).

It's a shame however that the US Treasury Department couldn't manage to put its money where its mouth is in quite the same way. Despite claims of a government bailout last week, they failed to produce the dollars needed to support Freddie Mac and Fannie Mae, the two behemoths of the US mortgage-lending market.

In his testimony to Congress on Tuesday, Bernanke finally conceded this point, admitting that no money, at least none without strings, would indeed be forthcoming from the pockets of the Federal Reserve. It was perhaps no more than an empty gesture conceived to temporarily buoy up the dollar, culminating in a return to its nose-down position as the smokescreen cleared.

Further, his acknowledgement that many of the financial markets and institutions were under considerable stress, caused the dollar to fall to an all-time low of 1.6038 to the euro.

On the back of this weakening dollar and with a five-day strike by Brazilian oil workers at the state-run Petrobas, oil prices rocketed to almost records heights at the beginning of the week, gaining by $1.36 to $145.31 p/b on Brent Oil for August.

Just days later they plummeted, undergoing the hardest fall in 17 years, after speculation the flailing US economy would affect global demand.

This precipitated a third big oil sell-off in just over a week with prices dropping by as much as $9 per barrel at one stage.

Back in Blighty, the pound experienced a wobble as labour market data published mid-week reported that jobless claims had risen by 15,500 in June, the biggest rise since December 1992.

Reaction to wage increases was muted though. Average earnings had appreciated by 3.3% in the year to May, but as CPI figures showed inflation for May at the same 3.3%, in real terms, wages experienced zero growth.

With June's inflation rate swelling to 3.8%, however, it seems likely that real earnings growth may now have become negative.

Traditionally this would call for an increase in wages but with the rising cost of raw materials and the slack job market, companies are unlikely to want to put added pressure on their profit margins.

The Bank of England is championing this measure, believing it a necessary evil to bring inflation back under control from the 4 percent level expected by the end of the year.

Realistically, in the short term there is little the MPC can do as the problem is not based on local but global demand and faltering global supply.

Dampening consumer spending power in a sluggish economy by increasing interest rates may not be productive, which is why the MPC has indicated rates may well remain the same until the end of the year.

Inflation elsewhere was similarly gloomy.

The EU hit 4 percent with the fastest price rises in 12 years, while the U.S. trumped this with an outstanding 26 year high of 5 percent. With so much negativity pouring out of the U.S. economy, The Financial Times reported on Thursday that some of the world's largest sovereign wealth funds were seeking to decrease their dollar holdings.

One Gulf fund in particular had reduced dollar assets to 60 percent from 80 percent one year ago.

Many of those withdrawing from the U.S. currency are turning towards the Australian and New Zealand markets.

There, many assets, the recent commodity boom and strong regulations have lured investors to the point where the Aussie dollar strengthened to a 25 year high and the NZ dollar grew to its largest in five weeks. Figures showing a reduction in Aussie unemployment only served to cement confidence down-under.

Although the spectre of impending recession is haunting most nations, Europe's super-power Germany has especially had to take it on the chin over the last few days.

Figures released from the ZEW research institute this week showed a bigger drop than expected in investor confidence from minus 52.4 in June to minus 63.9 in July, the lowest in 16 years.

Marred by storming inflation and high interest rates, the downturn looks set to continue. The poll predicted a number of key factors will continue to hit Germany companies hard for the next six months, including weak domestic demand and the U.S. financial crisis.

Just to the east and the Polish zloty is seeing high appreciation according to Slawomir Skrzypek, the head of the Central Bank.

He said that Polish exports have not been negatively affected despite inflation at 4.6 percent for June and an expected peak in August of between 4.6 and 5 percent.

Wages increases were also high, 12 percent year-on-year while interest rates stood at 6 percent.

In neighbouring Czech Republic the crown set a record of Kc 14.55/$ on Tuesday. Data released by the Czech National Bank on balance of payments caused little reaction despite showing a deficit of almost Kc11.7 billion in May and a deficit of Kc1.8 billion on transfers to the EU budget.

Drawing a close to the week and news today unfortunately sees the pound getting a bit of a pasting.

The construction industry announced job cuts of 4,000 since the beginning of July.

While speculation in the Financial Times that Alastair Darling's new spending guidelines may mean government borrowing could exceed debt limits, have sent the sterling downwards. In Tokyo, the pound dropped to $1.9972 while against the euro it fell to 79.33 pence.

Senior currency strategist at Westpac Banking Corp in Sydney, Sean Callow, believes the pound could weaken to $1.9800 in the next few days. He said: "The fact that the Treasury would go this far shows that times are desperate and the economy must be in a pretty poor state."

Similarly, Thomas Harr, a senior currency strategist in Singapore at Standard Chartered Plc, Thomas said: "We're bearish on the pound. We expect the U.K. economy to go into a recession. It's a combination of the housing market and financial market stress."

It is felt the pound could even dip as low as $1.7700 by the end of September 2009.

As a whole, things aren't looking particularly rosy on the domestic front but at least it's comforting to know our inflation isn't anywhere near the whopping 100,000 percent mark Zimbabwe's is currently at.

Not yet anyway.