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The US economy contracted 0.5% in the third quarter sending global equity markets lower yesterday. The US accounts for 25% of global GDP and economic contraction in the US has significant implications for global market confidence. Otherwise, market movement is limited due to the holiday period.

Pound Sterling – UK Markets

The Pound is sitting at 1.47 versus the US Dollar and trading at 1.05 versus the Euro this morning after taking a further battering following the release of third quarter GDP data.

The Office of National Statistics announced yesterday a 0.6% economic contraction in the third quarter, the fastest rate for nearly 20 years. Production output declined 1.4% and the service sector shrunk by 0.5%. Government services remain the only growing sector of the economy at present and BBA figures showed new mortgage approvals have also fallen by 60%. There is little economic data between Christmas and New Year and Sterling is likely to occupy low ranges as markets price in expectations of a further interest rate reduction on January 8th.

US Dollar – US Markets

The Dollar has declined against the Pound and Euro, suffering from the release of GDP statistics yesterday which showed the US economy contracted by 0.5% in the third quarter.

World equity markets lost ground on the news as the US accounts for 25% of the global economy. Home sales and prices also fell at record levels which had the effect of bringing the price of crude back to $40 a barrel. Jobless claims, personal income and spending figures are released in the US today and could induce some volatility in the Dollar rate.

Euro – European Markets

The Euro retained its strength overnight, as Sterling and the US Dollar suffered from the release of negative economic data. The Euro is currently at 1.39 versus the US Dollar and 0.95 against the Pound.

Spain has become the latest in the long list of countries to officially join recession and the ECB is not ruling out further interest rate cuts, commented Ewald Nowotny yesterday. Nowotny is a member of the ECB Governing Council member and head of the Austrian central bank. Data has been light in the run up to Christmas for the Eurozone and there are no major figures over the coming days which indicate we could see the continuation of the Euro’s bullish run on Sterling and the US Dollar.

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GDP figures this morning show a 0.6% contraction in the UK economy for the third quarter and new mortgage approval figures have declined to 17.773k for November. US equity markets have weakened after the S&P index labelled General Motors with a ‘high likelihood’ of bankruptcy.

Pound Sterling – UK Markets

Sterling is relatively unchanged overnight, trading at 1.48 versus the US Dollar and 1.06 against the Euro but could decline throughout the day as markets react to economic data released this morning.

ONS figures show the UK economy contracted 0.6% in the third quarter, revising annual forecasts to 0.3% growth. BBA mortgage approval figures show a deepening of the property slump with the number of new mortgages declining significantly since October. The UK entered recession in mid 2008 and the negative economic outlook combined with aggressive interest rate cuts and high budget deficits continue to fuel the decline of Sterling. With a raft of important data out in the UK and US today, combined with traders jostling for end of year position, we could see some significant market volatility in the coming days.

US Dollar – US Markets

The US Dollar weakened throughout the day yesterday as equity markets turned negative in reflection of general unease over the economic situation.

Yesterday General Motors stocks tumbled the most in a month, erasing the 23% gains made following the provision of Federal funds to the company. The S&P labelled GM with a ‘high likelihood’ of bankruptcy and investors replaced their initial confidence with concerns over long term viability of the company. Toyota is also due to reduce their North American payroll after the announcement of profit losses yesterday. Oil declined to $41 a barrel as negative equity markets and the record contraction of Japanese exports highlighted concerns over global growth. While surging demand from developing nations fuelled the price rises earlier in the year, economic contraction is driving the price lower at present. OPEC has announced plans to cut production by 5%. A barrage of top tier economic data is released in the US today including personal consumption and GDP figures.

Euro – European Markets

The Euro remains strong internationally, gaining against the Dollar for the second day in a row amid speculation that the US recession is deepening. Against the Pound the drive towards parity seems to have stalled for the moment, but is likely to resume with further interest rate reductions from the Bank of England in January.

Figures this morning show the EMU current account has narrowed beyond expectations with a €6.4 billion deficit in October, down from €8.8 billion in September. Official figures released in Germany show a 2.7% economic contraction is expected in 2009 as it appears the Eurozone will not be immune from a long and protracted recession. Today is light for Eurozone data and the Euro could strengthen further as market data is likely to batter the US and UK.

Other Currencies – Highlights

The Australian Dollar gained a boost against the US overnight and reached 3 months highs against the Pound, supported by higher commodity prices internationally. In New Zealand third quarter GDP figures revealed the economy has shrunk by 0.4% for the third consecutive quarter making this the longest recession in 10 years. The figures are likely to prompt a further interest rate reduction to record levels which could devalue the New Zealand Dollar internationally.

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The Japanese Central Bank slashed interest rates to 0.1% yesterday and the Pound slid further towards parity, hitting 1.0464 against the Euro as official figures revealed the extent of government budget deficits in the UK.

Pound Sterling – UK Markets

Despite trading at low levels internationally, the Pound has strengthened overnight to bounce back from another all time low against the Euro. Sitting just above 1.5 this morning against the US Dollar, the Pound is at 1.06 versus the Euro.

Sterling suffered another round of selling yesterday following news that government borrowing had reached record levels. The ONS showed government debt rose to £16 billion in November, £5 billion more than this time last year. The GFK consumer confidence survey released this morning has shown sentiment has improved in recent weeks and a 0.3% rise in retail sales for November support this case. It appears heavy discounting and a reduction in VAT may be working to stimulate consumer spending in the run-up to Christmas although concerns still exist for the new year. Trend-wise, Sterling remains bearish and some analysts claim the widening interest rate differential between the ECB and Bank of England is fuelling the depreciation of Sterling. The reduction of the UK base rate to 2% has inverted the normal rules of the Sterling/Euro relationship and this, combined with negative economic data, is channelling the currencies towards parity. With the prospect of further rate cuts in January almost certain, we are likely to see Sterling remain in very low ranges in early 2009. There is no further data from the UK today.

US Dollar – US Markets

The US Dollar has strengthened overnight against its major currency partners, up 1% against the Euro although it has slid against the Japanese Yen as interest rate cuts have failed to lower the appeal of the Yen internationally.

Yesterday the Federal Reserve slashed rates for overnight lending in a move that was widely expected by markets and designed to improve liquidity in the financial sector. The Philadelphia Fed manufacturing survey showed further contraction in the manufacturing sector, comparable to levels experienced in the 1981-1982 recession. Combined with the news that China has revised growth forecasts to 5% for 2009, this led oil prices to slide, reaching $44 a barrel amid uncertainty over the future of Asian and US growth. There is no data from the US today although GDP and Personal Consumption figures on Tuesday could induce some Dollar volatility.

Euro – European Markets

The Euro has weakened slightly overnight, losing 1% against the US Dollar and Pound but remains trading at the upper limits of its ranges against its major currency partners.

German Producer Price index figures yesterday showed the largest monthly decline since 1949, dropping by 1.5% from October to November. This was larger than predicted by economists and as the Eurozone’s largest economy, proved to be a source of weakness for the Euro yesterday. The Euro is still benefiting from the lack of sharp interest rate reductions by the ECB and severely weak data coming out of the UK and US. There is no major data from the Eurozone today.

Other Currencies

The Japanese Central Bank has slashed interest rates overnight to 0.1%. The Bank reported fiscal conditions had ‘deteriorated sharply’ as the Yen has reached 13 year highs against the Dollar recently, causing problems for Japan’s export based economy. The Bank also revised growth forecasts to 0% for the 2009 financial year. The rate cut has failed to counter the rise of the Yen which continues to strengthen internationally this morning.

The Australian and New Zealand Dollars have slid back from their strong position early in the week as further negative economic data has dampened risk appetite internationally. The Australian Dollar reached 3 month highs against the Pound as expectations of further interest rate cuts continue to mount with Bank of England deputy governor Charles Bean stating UK interest rates could reach zero early next year. There is no data from Australia today and New Zealand’s GDP and consumer confidence figures are due early next week.

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Sterling continued its decline against the Euro yesterday after the MPC minutes revealed a 9-0 vote in favour of a 1% base rate reduction. Labour market data in the UK revealed a 0.2% rise in the official unemployment rate, taking it to 6% for October and the Pound continued to plunge towards parity with the Euro.

Pound Sterling – UK Markets

Yesterday was another black day for the Pound as labour market data and the release of the MPC minutes sent Sterling plunging towards parity with the Euro. This morning Sterling has reached another record low against the single currency of 1.06. The Pound also depreciated against the US Dollar, falling away to 1.53 and lost ground against its other international currency partners overnight.

The MPC minutes showing a unanimous vote for a 1% reduction was interpreted by markets as an indication of further rate cuts to come and this sent Sterling into a freefall. The Pound is yet to find a bottom against the Euro and is rapidly approaching parity. Weak labour market data also showed the official unemployment rate rose to 6% in October and this is expected to continue to rise as more companies are forced into redundancies by the credit crunch. Yesterday David Blanchflower predicted unemployment could top 3 million. This morning retail sales figures showed an unexpected rise in November taking year on year growth to 1.5%. On the positive side, there is the view that the very weak Pound is preventing the manufacturing and export sectors of the British economy from further downturn. With no further data in the UK today Sterling is expected to remain under pressure.

US Dollar – US Markets

There have been mixed results for the US Dollar overnight. Gaining nearly 1% against the battered Pound, the Dollar has lost ground against its other major partners as 0.25% interest rates in the US have boosted investment in the higher yielding currencies.

The price of crude declined yesterday following the OPEC announcement to cut production by 2.2 million barrels a day. This morning oil is trading back at the $45 level, as threats to supply were mitigated by IMF statistics which revised global growth predictions downwards. The Philadelphia Fed Manufacturing Survey, regarded as a reliable snapshot of the manufacturing industry, is out today.

Euro – European Markets

The Euro continues its bullish run on the Dollar and Pound, gaining nearly half a percentage point this morning on the Dollar and 1.3% on the Pound to trade at a new record high of 0.94.

Yesterday’s figures showed German business confidence fell to its lowest level since 1982 as recession takes its toll on the Eurozone’s largest economy. German manufacturing figures have been in decline for five consecutive months and exports have contracted by 0.5% as global demand grinds to a halt. The ECB meets today and may announce measures to facilitate greater interbank lending which is still regarded as one of the greatest barriers to economic recovery. The EMU trade balance is also out today.

Other Currencies

The Australian and New Zealand Dollar have gained for the fourth consecutive day against the US Dollar as widening interest rate discrepancies lead investors to favour the higher yielding currencies.

Benchmark interest rates are 4.25% in Australia and 5% in New Zealand compared with 0.3% in Japan and 0.25% in the US and this large discrepancy has supported the Aussie and Kiwi Dollars recently. The Japanese Central Bank meets today amid pressure to lower the value of the Yen which reached a 13 year high against the US Dollar this week. The Bank of Japan’s interest rate decision is due tomorrow.

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The Federal Reserve slashed interest rates to an unprecedented 0.25% yesterday, making the current base rate the lowest in US history. The decisive reduction was announced amid further ‘quantitative easing’ measures to stimulate the economy and ward off deepening recession. The US Dollar depreciated following the news and global equities climbed.

Pound Sterling – UK Markets

Sterling has recovered substantially against a broadly weaker US Dollar, currently trading at the 1.55 level. Against the Euro the Pound continues to slide, reaching a new low yesterday and sitting at 1.103 this morning.

The Office of National Statistics announced this morning that unemployment hit 1.86 million in the three months to October. David Blanchflower, labour market expert from the Bank of England, has warned unemployment is set to reach 3 million during the current recession. The weakening labour market will continue to weigh on Sterling as employment is a key factor in consumer confidence and business sentiment. Retail and consumer price inflation figures yesterday showed inflation declined to 4.1% in November from 4.5% the previous month. The Bank of England’s inflation letter announced rates could move ‘materially’ below the official target of 2% in the second half of 2009 as lower energy prices, interest rate reductions and heavy discounting from retailers drive prices lower. Today the Bank of England Minutes are released and these could provide clues as to further rate decisions in 2009. Economists are currently predicting UK base rates could fall to 1% which is also a source of pressure for the Pound.

US Dollar – US Markets

The US Dollar depreciated internationally following the Fed’s interest rate decision. Reaching a 13 year low against the Japanese Yen yesterday, the Dollar remains low against its international partners this morning as market confidence increases risk appetite internationally.

The FOMC reduced the US base rate to 0.25% yesterday, taking interest rates to their lowest level in the history. The 0.75% reduction is essentially a zero interest rate policy and was accompanied by Federal pledges of more unorthodox measures to stimulate the property market and ward off deepening recession. Wall Street jumped 4.2% in response to the news and equities climbed around the world. The price of oil has also risen for the first time in 4 days after OPEC announced a cut in production by 2 million barrels a day. This also contributed to Dollar weakness and OPEC could find themselves in a Catch 22 as attempts to raise the price of oil potentially undermine global recovery prospects. Today is light for US data with the Philadelphia Fed Manufacturing Survey, a key indicator of manufacturing sentiment, due tomorrow.

Euro – European Markets

The Euro continues its bullish run on the Pound and US Dollar this morning, up 0.48% against the Dollar and nearly 1% against the Pound.

While interest rate cuts and inflation data in the US and UK have dominated the global headlines this week, the Euro has remained out of the spotlight and benefited from collective stability. Consumer Price Inflation rates are due from the Eurozone today and these could indicate the extent to which deflation is likely to become an issue in 2009. The ECB has signalled it will not continue to cut interest rates into 2009 and has limited scope compared to its international counterparts to do so which could affect the value of the Euro in future. The Bank of Japan’s interest rate decision is also due on Friday.

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The Euro has been the major benefactor overnight as markets await a series of important data from the US and UK this week. The Dollar is broadly weaker in the run up to the Federal Reserve interest rate decision and Sterling remains low against the single currency as markets contend with more economic gloom in the UK.

Pound Sterling – UK Markets

The Pound has climbed back to the 1.5 level against the US Dollar this morning although is still sitting close to record lows against the Euro. This week is laden with important data and Sterling is likely to remain under pressure as the UK outlook remains bleak and budget deficits continue to rise.

This morning the UK government has ruled out intervention to stop the slide of the Pound, which has lost around 25% against the Euro since this time last year. As a higher yielding proxy to Sterling, the Euro is being favoured by investors at present for its perceived stability throughout the global economic crisis. This morning John Varley, the head of Barclay’s bank has admitted house prices could fall by up to 30% and the UK is only ‘halfway’ through the downturn. This is ahead of official unemployment figures on Wednesday which are expected to show a sharp increase. Lack of confidence in the UK economy is extending pressure on the Pound as it appears the recession will not be as short or shallow as initially thought. Today is light for UK data with the Bank of England inflation letter and consumer and retail price inflation figures due tomorrow. A decline in consumer and price inflation is expected as aggressive discounting and VAT reductions make goods cheaper in the run up to Christmas.

US Dollar – US Markets

The US Dollar is broadly weaker this morning ahead of the Federal Reserve interest rate decision and inflation figures due in the US this week.

A 0.5% reduction in the benchmark interest rate of 1% is expected when the FOMC meet tomorrow. The availability of liquidity is still proving a significant barrier to financial recovery and central banks are expected to keep cutting interest rates until we see and upturn in lending and more generous distribution of credit. Global stocks gained this morning as President Bush signalled the financial bail out for auto manufacturers would be swift and decisive. Lengthy or collapsed negotiations at this point could prove a hazard to market confidence and stability. Crude oil has gained, climbing to $46 a barrel ahead of production meeting on Wednesday where cuts are expected. A series of soft data is due in the US today with the consumer price index and FOMC decision likely to be the big market movers tomorrow.

Euro – European Markets

The Euro has become the ‘darling’ of currency markets and continued its ascent this morning, buoyed by market nervousness ahead of important figures from the US and UK this week. The Euro is currently trading at 0.89 versus the Pound and 1.34 versus the Dollar.

ECB President Trichet has called for financial discipline and stability this morning as Ireland has announced a €10 billion package to recapitalize the countries financial institutions. The stability of the 15 nation Euro has provided a significant degree of confidence in the currency in recent weeks and leaders have argued for continued recognition of the fiscal rules that govern the Eurozone. Producer and import prices released this morning from Switzerland show a decline for the fourth consecutive month. Today is light for data in the Eurozone with unemployment figures due tomorrow.

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The Pound sunk to a record low against the Euro yesterday of 1.1385, the lowest since the Euro began, after the NISER announced an economic contraction of 1% in the 3 months to November. The OECD has reported the global recession could be longer and deeper than originally thought with the UK being one of the worst economies hit.

Pound Sterling – UK Markets

Sterling sunk to a new historic low versus the Euro yesterday and remains low this morning. Reaching 1.13 against the single currency, economists speculate that parity could be achieved over coming months as the UK enters the trough of the downturn. Sterling strengthened against the US Dollar yesterday amid expectations of reduction in the US base rate next week.

Sterling has depreciated approximately 20% against the Euro from this time last year and is 25% lower against the US Dollar than in the summer months. The Pound continues to be undermined by weak production figures and the opinion that the UK could be one of the worst economies hit by the credit crunch. Although Darling’s pre-budget report predicted a 1% contraction next year, analysts are now putting that figure at closer to 2% and growth trends are being pushed back into 2010. The prospect of further interest rate cuts is also weighing on Sterling. The CBI Industrial Trends Survey, usually a good indicator of the health of the manufacturing sector, is due today and this could lead to further Sterling weakness.

US Dollar – US Markets

The Dollar is broadly weaker overnight amid uncertainty over the extent of the Federal Reserve base rate cut next week. The Dollar is down 0.6% on the Euro and nearly 1% on the Pound.

The general consensus is for a 0.5% reduction in the benchmark interest rates by the Federal Reserve next week, taking them to 0.5%. Equity markets have been relatively neutral this week, replacing some of the recent volatility as investors have become somewhat desensitized to bad news. Stocks could take a positive swing with the announcement of a rescue package for the automobile industry. Crude remains in the region of $43 a barrel and is expected to rise in price ahead of a production meeting on December 17 when cuts are likely to be announced. Jobless claims are due in the US later today.

Euro – European Markets

The Euro reached an all time high versus the Pound yesterday and remains high this morning as weak UK data continues to pressure Sterling. The Euro also gained on the US Dollar throughout the day yesterday breaking back through the 1.3 level to trade at 1.31 this morning.

Figures yesterday showed industrial production has declined in both France and Italy but this failed to stop the ascent of the Euro as negativity plagues its major currency partners. Economists are predicting the Pound could slide more against the single currency and we may see new lows in coming weeks. The ECB release their monthly report today which will detail prevailing economic conditions in the Eurozone.

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Sterling remains weak this morning after production statistics show the UK economy is contracting at the fastest rate since 1990. The Euro has strengthened overnight against the Pound and US Dollar and European Commission President Jose Manuel Barroso has called for an EU-US agreement to battle recession.

Pound Sterling – UK Markets

Sterling remained low against the US Dollar yesterday and is holding at the 1.48 level this morning. Against the Euro the Pound is back down to the 1.14 mark, still under pressure by the weight of negativity surrounding UK economic prospects.

This morning the National Institute of Social and Economic Research announced the UK economy contracted 1% between September and November 2008. Although official fourth quarter statistics will be released in January 2009, it appears the UK economy is contracting at record levels. Industrial production figures yesterday showed a 1.8% decline in the 3 months to October. The manufacturing sector also declined by 2% dragging down annual growth figures. This decline can in part be attributed to the downturn in export markets as the EU accounts for 58% of UK exports, while the US is the single largest market. The OECD has warned economic downturn for the UK would be ‘severe’ throughout 2009. There is no further data from the UK today while the CBI Industrial Trends Survey is due tomorrow.

US Dollar – US Markets

The US Dollar is slightly weaker against the Euro and Pound this morning. The Dollar is also down against its Asian and European currency partners in the absence of positive economic sentiment and ahead of rate cut expectations next week.

Despite underlying economic negativity, global equity markets have sustained upward momentum as the continuing prospect of interest rate cuts are supporting the case for economic upturn in mid 2009. Congress may vote today on a $15 billion rescue package for the US car industry and oil is up to $43 a barrel amid reports of production cuts from Saudi Arabia. There is no major data from the US today with trade balance figures due tomorrow.

Euro – European Markets

The Euro has gained against the US Dollar and Pound this morning as the European Commission President, Jose Manuel Barroso has called for a US-EU joint stimulus package to mitigate the effects of recession.

Tomorrow the 27 European Commission member states will converge in an economic summit to formulate a plan to combat recession. German Chancellor Angela Merkel is coming under increasing pressure to adopt a more generous rescue package as Germany is Europe’s largest economy with a budget deficit close to zero. Germany also has a large manufacturing sector and would be one of the hardest hit if the recession is to be deep and long lasting. Data released this morning shows Norway’s PPI has risen 11.9% in the year to November. There is little more of note today and the ECB’s monthly report is due tomorrow.

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Sterling has sunk again against the Euro and US Dollar ahead of UK trade figures released this morning. Negative underlying trends and production figures are capping the value of Sterling at present and it remains hovering just above all time lows versus the Euro.

Pound Sterling – UK Markets

Sterling has sunk lower against the US Dollar, trading around 1.47 ahead of UK trade data released today. The general trend in Sterling is negative at the moment as some economists are predicting we are in the trough of the economic cycle. Against the Euro, the Pound is back down near the record low of 1.14 and has also declined against most of its international currency partners.

Yesterday the British Retailers Consortium announced retail sales had fallen by 0.4% in November, on top of 0.1% in October. This is the first consecutive contraction in 13 years and the Producer Price Inflation index fell from 6.8% to 5.1%. In the UK home sales are continuing to slump, as job uncertainty restricts the purchases of big ticket items and this morning Sony has announced plans to cut back 8000 jobs following weaker sales and the recent strength of the Yen. UK trade statistics are due today and are capping the value of Sterling. While the low Pound is usually good news for exporters, the downturn in global markets means trade balance figures are likely to bring bad news for Sterling. Industrial production data is due tomorrow and expectation over this could keep the Pound under pressure throughout the day.

US Dollar – US Markets

The US Dollar has appreciated this morning as equity markets gain confidence following the announcement of government rescue packages and expected interest rate cuts next week. The Dollar gained against the European and Asian currencies with the exception of the Yen this morning.

Congress is currently negotiating a bail out of the ‘big three’ car manufacturers, GM, Chrysler and Ford, as recession has left the US automobile association on the brink of collapse. This has strengthened stock markets and the Dollar has benefited while market focus remains on UK and Eurozone data this morning. Pending home sales are due in the US today and the week is light for US data until Friday when markets will be interested in retail sales and producer price index figures.

Euro – European Markets

The Euro has declined against the US Dollar this morning, down 0.5% but gained on the Pound as weak UK trade statistics have anchored Sterling at low levels. French and German trade data released this morning show widening deficits and shrinking export markets as recession makes its mark on the Eurozone. This is the third time in a row that figures have been at an all time low for France. Swiss unemployment has also risen to 2.7% up from 2.5%. There is no further data out in the Eurozone today.

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The Pound and Euro have recovered from very low levels last Thursday following interest rate decisions from their respective central banks. Rising unemployment on ‘non-farm Friday’ in the US sent the Dollar lower but markets have gained ground this morning, buoyed by Obama’s announcement of increased government spending to stave off recession in the US.

Pound Sterling – UK Markets

The Pound has recovered some of the ground lost last week, when it reached an all time low against the Euro and fell sharply against the US Dollar. Currently sitting in the 1.49 region versus the Dollar and up to 1.16 versus the Euro, Sterling has benefited from improved market confidence in the wake of Obama’s plan to create jobs in the faltering American economy. The Pound is also stronger against its other major currency partners.

After suffering from the announcement of record contraction in manufacturing and service sectors last week, Sterling has clawed back ground lost against the Euro and US Dollar. The London FTSE 100 leapt more than 6% this morning on the back of Obama’s plan and reports of an expected upturn in the UK economy in the second half of 2009. However, Sterling is expected to remain under pressure till the end of the year. Producer price figures are due out this morning with limited economic data for the rest of the week.

US Dollar – US Markets

The US Dollar has declined overnight against the Euro and European currencies and is down over 2% against the Pound after the announcement of the highest unemployment rate in 34 years. However, a degree of confidence has returned to markets this morning following the announcement of Obama’s billion dollar package to increase public works and stave of depression in the US.

Friday brought the non-farm employment figures in the US showing that 533 000 joined the ranks of the unemployed in November. This takes the official unemployment rate to 6.7% and supports the entrenchment of recession in the US which does not bode well for exporting nations. This morning Obama has announced a billion dollar package to create 2.5 million new jobs through government funded public works. Setting aside burgeoning government deficits for the meantime, the plan is to create jobs and stimulate the economy. Commodity prices have risen on the news. This week is also light for US data until Friday when retail sales figures and the producer price index are due. The next Federal Reserve interest rate decision is on December 16.

Euro – European Markets

The Euro has strengthened overnight, up 1.4% on the Dollar and higher against many of the Asian currencies. Stock markets in Europe and Asia have also rallied following the news of Obama’s economic stimulus plan.

The Euro begins its second decade on January 1st and many economists are watching with interest what is regarded as the true ‘litmus test’ of the Euro. After battling inflation for the first decade, it appears deflation will be the next problem in the Eurozone meaning the ECB may lag behind other central banks in their interest rate cuts. The full extent of recession in the Eurozone is still emerging. German industrial production figures are due today and Trichet is to deliver a speech this afternoon.

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