Buy Currency Online – Excellent Currency Solutions

Sterling is under pressure this morning over losses in the banking sector. Lloyds is yet to strike a deal with the Treasury over inclusion in the Asset Protection Plan and HBOS has announced over £10 billion worth of write downs for 2008. GDP figures out in the US later today will be a source of interest for markets as growth prospects in the world’s largest economy remain a key driver of economic sentiment and currency exchange rates.

Pound Sterling – UK markets

The Pound has declined against the Dollar overnight and is also lower against the single currency as losses in the banking sector dominate headlines in the UK. Markets have gained some solace over the level of Government commitment to the bail out but the prospect of rising government debt is anchoring Sterling to the bottom end of trading ranges. The Pound has gained on the Australian and New Zealand Dollars as appetite for risk diminishes ahead of US GDP figures out today.

Yesterday Sterling suffered in response to the news that the Government would increase its stake in RBS to 84%. Current predictions show the level of taxpayer ownership could rise as high as 95%. Shares in fellow banking giant Lloyds have plummeted 7.4% this morning following news that the bank is yet to strike a deal with the Treasury to insure over £200 billion worth of toxic debt. Despite posting a profit of £807 million in 2008, Lloyds shares have been dragged down after the acquisition of HBOS late last year. HBOS lost £10.8 billion before tax in 2008. UK consumer confidence rose slightly in February, up 2 points from January as the effects of monetary easing are starting to work their way into the economy. There is no further data in the UK today.

US Dollar – US Markets

The Dollar has spiked against the Euro and Pound this morning ahead of annualised US GDP and personal consumption figures to be released later in the day. Investors remain uneasy about what these announcements will bring and this is fuelling risk aversion which is driving Dollar strength. The US Dollar is up over 1% on the Australian and Kiwi Dollars and has gained 0.95% on the Pound.

Growth prospects in the US remain a key indicator of market sentiment and currency exchange rates. An annualised contraction of -5.3% is expected for the fourth quarter following a 0.5% annualised contraction in the third. This represents the drastic decline in the US economy following the market shocks in late 2008. Personal consumption expenditure will also be viewed with interest as consumer spending accounts for 70% of the US economy. The Obama administration has instructed Citigroup to find a private source of capital after committing $45 billion to the bank last year. Shares in Citigroup fell below $2 for the first time in 18 years this week amid speculation that the Bank would be subject to nationalisation. GDP and personal consumption figures are out later in the day.

Euro – European Marketsrrencies

The Euro remains bearish this morning due to a combination of risk aversion, lower commodity prices and the prevailing market view of economic deterioration in the Eurozone. The Euro is up against the Pound, Australian and New Zealand Dollars although has suffered declines against its other currency partners including the Yen, Canadian and US Dollar.

European equities were in retreat yesterday amid concerns over commodity prices and the economic situation in Eastern Europe. The Hungarian Prime Minister has requested a ?180 billion aid package for Eastern Europe which is set to include recapitalisation for banks and restructuring of foreign debt. The rapid depreciation of national currencies is also a pressing concern. The Polish Zloty has dropped 29% against the Euro in the last 6 months and other currencies have suffered similar declines. The EMU consumer price index and employment rate are out today along with the consumer price index for Germany.

Other Currencies – Highlights

Australian markets received a boost overnight as strong capital spending figures triggered confidence in the economy to weather global recession. Capital spending in the final quarter of 2008 showed a 6% rise despite expectations of a 3% decline. Capital spending makes up 10% of GDP and this sent the Australian Dollar higher against the US Dollar. The return of risk aversion this morning though has seen the US Dollar recover over 1% on the Aussie. The RBA interest rate decision is due next week.

Canadian stocks have rallied overnight as three major banks posted higher than expected profits. The National Bank of Canada, Royal Bank of Canada and Canadian Imperial Bank of Commerce each gained more than 6% after making profits without the help of government aid, boosting investor confidence in the sector.

(c) Currency Solutions – Click Here For Currency Solutions

The Pound is sitting lower this morning against the Euro and US Dollar after RBS has posted the largest loss in corporate history. The bank which is now 68% taxpayer owned lost £24 billion in 2008. In combination with GDP figures which showed the UK economy contracted -1.5% in the fourth quarter, this news damaged the exchange rate value of Sterling, sending it back to the bottom end of ranges against its international currency partners.

Pound Sterling – UK markets

The Pound has lost ground against the US Dollar and Euro overnight, declining to 1.42 and 1.11 respectively after GDP figures revealed a sharp contraction in the fourth quarter of 2008. The Pound is also down against the Swiss Franc and Australian Dollar, but has gained on the Yen and other Asian currency partners.

The Pound declined yesterday as GDP figures revealed a sharp 4th quarter contraction of an unrevised -1.5%. A breakdown of these figures showed a 4.5% decline in industrial production and a 2.3% decline in investment. The only expansion came from Government services which grew by 1.5% and David Blanchflower of the MPC is predicting first quarter GDP to be significantly worse. This morning the Pound has suffered further following news that RBS posted a loss of £24.1 billion in 2008, the largest in corporate history. This was blamed on ‘unprecedented turbulence’ in financial markets and the bank expects further difficulty throughout 2009. After paying the government £6.5 billion worth of preferential shares to take part in the Asset Protection Scheme, the bank is to place £300 billion worth of troubled assets with the UK taxpayer. Nationwide building statistics released this morning show house prices have fallen 1.8% in February, taking the average house price down 17% from a year ago. There is no further data in the UK today.

US Dollar – US Markets

The Dollar is down against the Pound and Euro this morning as weak home sales figures yesterday damaged the Dollar’s safe haven image. The Dollar is also down against the Canadian, Australian and Kiwi Dollars as markets retain a small appetite for risk in the wake of comments from Ben Bernanke and President Obama yesterday.

News that US home sales fell by 5.1% in January capped Dollar gains yesterday. The Federal Reserve expects an upturn in growth to take place in the third quarter of 2009 and despite recent rallies, this news is muting the tone in UK and European equities, as growth here is expected to follow the US by approximately three months. A raft of US data is out today from jobless claims to durable goods orders and market sentiment is likely to be the primary determinant of currency exchange rates.

Euro – European Markets

The Euro is up against the US Dollar this morning, trading at 1.27 and the Euro-Pound exchange rate is currently 0.89. The Euro has also strengthened on the Yen and it’s other Asian currency partners.

European equities remain positive this morning following Ben Bernanke’s announcement that the Federal Reserve would not be looking to nationalise major American banks. UBS shares rose yesterday after Switzerland’s biggest bank hired the former CEO of Credit Suisse to restore market confidence. The news was interpreted positively by markets and Europe’s Dow Jones climbed 1.9%. The German unemployment rate has risen to 7.9% as a further 40 000 people were made jobless in February as recession deepens in the Eurozone’s largest economy. Today markets will be interested in consumer, industrial and economic confidence figures to be released in the Eurozone.

Other Currencies – Highlights

The Yen fell to a three month low against the US Dollar and weakened against the Euro overnight after figures yesterday revealed a 46% drop in exports. The Yen is heading for its worst month against the Dollar in 13 years and faces threats to its status as an international safe haven as the country is hit increasingly hard by the global recession. A series of significant data is released in Japan today, including industrial production, consumer price index and retail trade figures.

(c) Currency Solutions – Click Here For Currency Solutions

Figures released this morning show UK GDP contracted 1.5% in the final quarter of 2008. This takes annual growth to -1.9%; a figure largely in line with market expectations. Wall Street gained over 3% yesterday, the largest gain in a month, after comments from Head of the Federal Reserve Ben Bernanke quelled investor fears over the state of the US banking sector.

Pound Sterling – UK markets

The Pound is up 0.6% on the Dollar this morning, trading at 1.45 on the back of increased risk appetite after Wall Street gains yesterday. The Pound is also up against the Euro, Yen and Australian Dollar, trading at 1.13, 141 and 2.22 respectively.

UK GDP figures out this morning show the economy contracted by -1.5% in the fourth quarter of 2008. However despite this, the Pound has strengthened as a result of positive market sentiment in the US. Minutes from a meeting of EU officials yesterday showed concern over the ‘financial stability’ of the British economy following the rapid demise of the Pound late last year. The Pound has fallen 23% against the Euro as a major trading partner, this weakness is a concern for the Eurozone. Exceptionally high volatility over recent months is also undermining financial stability. UK statistics yesterday showed mortgage approvals down 40% on this time last year and unemployment continues to rise. However the CBI Distributive Trades survey was less negative than expected and the retail sales index rose from -47 last month to -25 this month due to more positive sales figures. The Bank of England MPC meets next Thursday and market expectations are for a further 0.5% rate reduction. Reductions beyond 1% are regarded as less significant and quantitative easing is likely to be the path of the government over the coming months. There is no further data in the UK today.

US Dollar – US Markets

Mixed results for the Dollar overnight as increased risk appetite led to a redistribution of investor funds. The Dollar weakened against the Euro and Pound to trade at 0.77 and 0.68 but retained gains against some of its Asian and European currency partners.

Head of the Federal Reserve Ben Bernanke quelled fears over the state of the US banking system yesterday in a speech noting that nationalisation of major banks would not be necessary. Bernanke stressed the role of government as supervisor rather than shareholder and Wall Street posted its largest daily gains in a month. President Obama also addressed the nation, detailing aspects of an ambitious government plan which includes both stimulating and greening US industry, cutting taxes and halving the US budget deficit within the next five years. Despite the inevitable criticism for the over ambitious nature of the plan, stock and equity markets gained confidence, improving global risk appetite. Also yesterday the Washington Post survey showed US consumer confidence plunged 10 points to a record low in February, on the same day as the German IFO revealed the same results in the Eurozone. US Home sales figures are out later today.

Euro – European Markets

The Euro has gained against the Dollar to trade at 1.28 and is up against the Yen as well as its European currency partners.

Stocks in Europe and Asia advanced following news from the US that the government would not have to nationalise major banks. Shares in Deutsche Bank and PNB Paribas, Germany and France’s largest banks both surged more than 7%. German GDP figures released this morning show the economy contracted -2.1% in the fourth quarter of 2008, reflecting the rapid deterioration of the European economy. This takes annual growth to 1.6% a figure that was largely in line with market expectations. The ECB has strongly hinted at a further interest rate reduction in March. The German consumer price index and unemployment figures are out tomorrow.

Other Currencies – Highlights

The Australian and New Zealand Dollars rallied overnight, following comments from Ben Bernanke which served to strengthen risk appetite internationally. The Australasian currencies continue to shadow US equities which remain the primary determinant of market sentiment.

Japanese exports have plunged 45.7% in January, taking them to the lowest figure in 10 years as a result of reduced demand from Japan’s major trading partners. The decline was fuelled by a 53% drop in exports to the US, 47% to the Eurozone and similar steep declines to China and other Asian economies. The Canadian Dollar is up to 1.24 against the US while the Swiss Franc is down on the Dollar, a further symptom of increased appetite for risk.

(c) Currency Solutions – Click Here For Currency Solutions

The US Dollar has weakened overnight following reports the US government may nationalise major US banks as a result of the financial crisis. Sterling has staged a minor rally following the publication of retail sales figures for January and EU leaders met over the weekend to discuss economic strategy ahead of the G20 summit in London in April.

Pound Sterling – UK markets

Sterling has strengthened overnight, climbing to 1.45 against the US Dollar and gaining 1.6% on the Yen amid news that the US government may nationalise major banks. The news fuelled a round of risk aversion but this failed to strengthen the traditional safe havens and Sterling gained on its major currency partners overnight.

PM Brown has announced a £14 billion credit injection into Northern Rock and the bank is to start lending again, expected to take on £5 billion worth of mortgages this year. This is a reversal of earlier government decisions and comes tempered with the warning that banks should end risky speculation and return to their more traditional role as ‘stewards’ of people’s money. Retail sales figures on Friday boosted the Pound as they rose by 0.7% for the month of January taking annual sales up by 3.6%. However this comes at a time when retail analyst Experian predicted 10% of high-street stores will be empty by the end of February and more solid trends may be visible in quarterly statistics. Nationwide housing prices are released in the UK today with new mortgage approvals out tomorrow.

US Dollar – US Markets

The Dollar has weakened for the third consecutive day on speculation that the US government may bail out major banks even further. The Dollar is down 0.74% on the Canadian Dollar and has also declined the Pound, Euro and other major currency partners.

Dollar weakness comes after Christopher Dodd, Chairman of the Senate Banking Committee announced that nationalisation of some banks may be necessary. Wall Street and equity markets fell to multi-year lows and the Dollar declined against the Euro and Yen. The Philadelphia Fed survey on Friday showed manufacturing has slumped to a 19 year low and a survey of business economists has shown the US recession is the worst in three decades. Consumer spending accounts for 70% of the US economy and this is expected to decline by 2.3% this year. There is no data out in the US today.

Euro – European Markets

The Euro has also rallied against the US Dollar, currently sitting at 1.28 after attempting to break 1.30 overnight. The Euro has also gained on the Yen and is currently trading at 0.88 against the Pound.

Leaders of Britain, France, Germany and Italy met over the weekend to formulate a position ahead of the G20 meeting to take place in London in April. Tighter market regulation and an end to risky speculative investments are expected to top the agenda. European leaders also agreed the IMF’s emergency fund for debt stricken countries should be increased to more than $500 billion. ECB President Trichet is to give a speech today.

Other Currencies – Highlights

The Australian and New Zealand Dollars have appreciated for the fourth consecutive day against the Dollar on speculation that the US Government is to increase its stake in the major US Banks. The Yen also declined amid speculation over the deteriorating Japanese economy expectations that export demand will continue to slump. This weakness could eventually undermine the safe haven status of the Yen. Minutes from the Bank of Japan’s February meeting are released today. The Canadian Dollar has gained against the US following weaker American equities and reports that Canadian core inflation fell by 0.4% in January. Canadian retail sales figures are due today.

(c) Currency Solutions – Click Here For Currency Solutions

The Pound fell to a two week low against the Dollar yesterday as minutes from the MPC meeting revealed quantitative easing is increasingly likely for the UK. The Euro is under pressure due to concerns over the economic situation in Eastern Europe and the US has passed a $275 billion package to address the crisis in the housing market.

Pound Sterling – UK markets

The Pound is gaining against the US Dollar this morning, currently trading at 1.43 after reaching a two week low yesterday. The release of MPC minutes indicating that quantitative easing was likely damaged the value of the Pound, although it was the Euro that came under pressure over concerns surrounding Eastern European economies. The Pound-Euro exchange rate is currently 1.13 and Sterling has gained against its major foreign currency partners.

Having revealed an 8-1 vote in favour of a 0.5% reduction in the base rate, the MPC minutes also indicated that quantitative easing is imminent as the Bank will buy gilts and other securities to increase the supply of money into the economy. With interest rates effectively at zero, the Bank is seeking more unconventional methods of unlocking credit markets and alleviating toxic debts. Sentiment regarding Sterling has turned marginally positive as markets focus on bad news coming from the Eurozone and Asian economies. This has allowed Sterling to stage a minor rally against the Euro and Japanese Yen. Money supply data is out in the UK this morning and retail sales figures are due tomorrow.

US Dollar – US Markets

The Dollar has declined over 1% against the Euro this morning as fears abate over European exposure to bad debts and the US stimulus packages revives appetite for risk. The Dollar is also down over 1% on the Australian and Kiwi Dollars and is down to 0.69 against the Pound.

Yesterday’s figures in the US revealed housing starts and new building permits dropped to record lows in January along with industrial production figures which contracted 1.8% for the month. This signals a weak start to 2009 after the US economy contracted 3.8% in the final quarter of 2008. President Obama released details of a $275 billion housing package which is an attempt to address the root of the financial crisis and prevent the rising number of foreclosures on American homes. An estimated 400,000 home owners lost their homes in the US last year. This comes in the same week as the $787 billion rescue package, yet market response remains uncertain as details and growth prospects are unclear. The Federal Reserve have also announced they expect unemployment to rise to over 8.5% and projected long-term interest rates at 2%. The FOMC minutes are released today along with the Philadelphia Fed and jobless claims figures.

Euro – European Markets

The Euro has strengthened this morning, gaining over 1% on the US Dollar to 1.26 after falling to its lowest rate since mid-November yesterday. The Euro-Sterling exchange rate is currently at 0.88 and the Euro has advanced on the Japanese Yen and New Zealand Dollar.

The Euro came under pressure yesterday as news of the deteriorating economic situation in Eastern Europe raised fears over the exposure of Western European banks. The Polish Zloty, Czech Koruna and Hungarian Forint have all reached multi-year lows against the Euro and major European banks warned of pending job cuts despite Societe Generale posting a fourth quarter profit. European equities gained for the first time in 8 days on the back of better than expected profits released from Nestle and BNP Paribas yesterday. The ZEW survey for Switzerland is out this morning and EMU purchasing manager indices for manufacturing and services are due tomorrow.

Other Currencies – Highlights

The Australian Dollar is under pressure this week amid news that Moody’s is to review the credit rating of the Australian Government. The Standard and Poor’s has previously claimed Australian banks are ‘well placed’ to withstand the downturn yet recent economic data from Australia has been worse than expected. The Bank of Japan left interest rates unchanged yesterday at 0.1% and the Yen fell to a 6 week low against the Dollar with the passing of the Housing Bill in the US Senate. Consumer Price index figures for Canada are due tomorrow.

(c) Currency Solutions – Click Here For Currency Solutions

The Sterling-Dollar exchange rate has declined this morning after the release of MPC minutes which showed an 8-1 vote for a 0.5% reduction in the base rate. David Blanchflower was again the dissenting voice within the Bank as he argued the 1% reduction should be taken ‘without delay’. Global equities remain bearish as unease surrounds global recovery prospects and this is putting pressure on European and Asian exchange rates.

Pound Sterling – UK markets

The Sterling-US Dollar exchange rate declined sharply this morning with the release of the MPC minutes and is currently sitting at 1.41. The Pound is also down over 1% against the Australasian currencies and the current Euro exchange rate is 1.12.

Minutes from the February MPC meeting released this morning revealed an 8-1 vote for a 0.5% reduction in the base rate. The Bank has reduced interest rates from 5% to 1% in the last 5 months and is predicting the UK economy will contract 4% from mid 2008-mid 2009. This is a significant revision of the Bank’s November forecast and is indicative of the steep decline we have seen since the Lehman shocks in September 2008. Recovery prospects depend largely on global economic efforts, hence the focus on US equities and the Bank of England is now looking to more unconventional fiscal policy. The main concern of the MPC is stimulating credit flows and restoring business and consumer confidence. This morning, the Work Foundation has urged the Government to provide the same financial support for manufacturing as it has for banks. Manufacturing remains a crucial sector for employment, export and GDP and is under serious pressure as global export markets contract. Results of the CBI Trends Survey are also published today.

US Dollar – US Markets

The Dollar has strengthened sharply against the Pound and Euro this morning as negative economic data continues to pressure the European currencies. Against the Yen, the Dollar has climbed to 92.56 and it has weakened against the Australian and New Zealand currencies.

The $787 billion Federal Reserve rescue package was signed by President Obama yesterday, which gave a slight boost to the US Dollar as it was described as the ‘most sweeping package’ in economic history. However the tone of global equities remains bearish, as uncertainty surrounds future economic prospects. General Motors and Chrysler have each asked the government for further aid in addition to that already provided by the Federal Reserve. However further aid is conditional on their economic viability and the big three auto manufacturers have until the March 31 deadline to prove their worth. The price of oil has fallen to $41 a barrel on the back of uncertainty with regard to growth prospects. Housing statistics are out in the US today.

Euro – European Markets

The Euro is weaker against the US Dollar this morning, trading at 1.25 and has also declined against the Australasian currencies. The Euro has gained against the Yen and is up to 0.88 versus the Pound following the release of minutes from the February MPC meeting.

European stocks have fallen for the third day in a row along with Asian equities on the back of global unease regarding recovery prospects. Societe Generale, France’s third largest bank has posted a profit in the fourth quarter of 2008 despite losses in its investment unit and the French government has submitted details of a €6 billion plan to aid French auto manufacturers to the European Union. The Euro has also declined after Moody’s claimed recession in Eastern Europe would affect the major central European economies. Euro sentiment could weaken as recession deepens across the Eurozone. There is no major data out in the Eurozone today.

Other Currencies – Highlights

Asian equities have displayed negative trends for the third consecutive day as they are still suffering repercussions from Japan’s economic contraction and the global sense of unease. Japan went from being one of the best performing economies to one of the worst in the three months to December as the US asset bubble and cheap Yen were obliterated by the financial crisis. The Australian and New Zealand Dollars slumped against the Euro overnight, driven lower by concern in Eastern Europe. The Bank of Japan interest rate decision is due tomorrow.

(c) Currency Solutions – Click Here For Currency Solutions

Risk aversion has returned to global markets following reports that the Japanese economy contracted by 3.3% in the 3 months to December. This was the largest contraction in 35 years and triggered a round of risk aversion which strengthened the Yen and US Dollar at the expense of most other currencies.

Pound Sterling – UK markets

The Pound has declined against the US Dollar this morning, returning to the 1.42 level amid the release of core inflation figures in the UK. Against the Euro, Sterling has strengthened to 1.12 and has also gained on the Australian, New Zealand and Canadian Dollars.

The UK Consumer Price Index has fallen by 0.7% in the month to January, dragging core annual inflation down to 1.3%. The Bank of England expects core inflation to fall to 0.5%, well below the 2% target as a result of a reduction in interest rates and significant monetary easing from the Bank. Declining oil prices and the reduction in VAT have also played a role in declining inflation rates and there are predictions deflation could occur for a brief period in the coming year.  Lloyds is in the spotlight again this morning after reports it could be forced into further write downs after the acquisition of HBOS. Lloyds was forced to announce £10 billion worth of write downs last week and their share price plummeted as a result. The G20 Summit to be held in London in April is the next global economic forum and many leaders are hoping this will mark a turning point for economic recovery. PM Gordon Brown is already calling for a stronger mandate for the IMF to enhance their role as an economic watchdog. Minutes from the last Bank of England meeting are released tomorrow along with the CBI Industrial Trends Survey.

US Dollar – US Markets

The Dollar has reached a 3 month high against the Euro as weak GDP figures on Friday have placed the single currency under pressure. The Dollar is also stronger against the Pound, Yen and other major currency partners this morning as risk aversion continues to characterise markets.

US trading was light yesterday due to a public holiday and the Dollar has strengthened this morning as risk aversion continues to characterise investor activity. The Senate passed President Obama’s $787 billion rescue package on Saturday, yet the plan is still subject to divisive party politics and received the support of just 3 Republicans in the Senate. Market response to the downscaled plan has been tepid and this is fuelling much of the risk aversion we are seeing at present. Next on the international agenda is the G20 summit to take place in London in April. A series of soft data is due in the US today with important housing statistics out tomorrow.

Euro – European Markets

The Euro has fallen to a 3 month low against the Dollar this morning of 1.26 and is currently trading at 0.89 against the Pound. The Euro has weakened after the release of GDP statistics in the Eurozone showed significant contractions in all the major economies.

European equities have been in negative mode following the announcement of weak Eurozone GDP figures and the sharp contraction in the Japanese economy in the final quarter of 2008. The export led German economy shrunk by 2.1% in the final quarter of 2008 and this was accompanied by over 1% contractions in France and Italy, which dragged Eurozone GDP down by 1.5%. While market consensus was initially that the Eurozone would be well placed to weather the recession, this appears not to be the case and the ECB is likely to make further rate cuts in their March decision. The ZEW Economic survey is out in Germany today along with the EMU trade balance.

Other Currencies – Highlights

Japan’s economy shrunk 3.3% in the final quarter of 2008, taking the annual decline to -12.7%. This is significantly more than in the US and Eurozone and has been fuelled by the strong Yen and declining export demand. Japan’s economy is the world’s second largest and is currently in the unique position of having an artificially strong currency despite a deteriorating economic outlook.

The Australasian currencies are trading in lower ranges as risk aversion continues to dominate markets. Asian and European equities are lower after news that the Japanese economy contracted by the largest margin in 35 years giving the Yen and Dollar a boost as the expense of most of the higher yielding currencies. New Zealand service sector activity fell to a record low in January and this has also battered the Kiwi. Retail sales figures are out in Australia tomorrow.

(c) Currency Solutions – Click Here For Currency Solutions

Currency exchange rates and equity markets are lower this morning after G7 finance ministers failed to provide concrete plans for economic recovery after their meeting in Italy over the weekend. Issuing a statement that was heavy on rhetoric but light on policy, the leaders have inadvertently added to pressure on the Federal Reserve to produce a rescue package. Confidence and growth prospects remain crucial to global economic sentiment.

Pound Sterling – UK markets

Sterling is weaker this morning on the back of an increase in risk aversion and unease surrounding UK economic prospects. The Pound has declined against the Dollar and Euro, trading at 1.42 and 1.11 respectively and is also weaker against the Yen and Canadian Dollar.

The Confederation of British Industry has predicted the UK economy will contract by 3.3% in 2009 and that government debt will rise to £148 billion. This is significantly more than the £118 billion Darling outlined in the latest budget and has added pressure to the Sterling-Dollar exchange rate. The UK car industry continues to suffer, with BMW announcing 850 job cuts from their Oxford factory. This Wednesday sees publication of the MPC minutes which will likely provide clues as to further interest rate reductions and monetary easing policy. Market consensus is for a 0.5% reduction in the base rate in March but following this the Bank will look towards more unconventional methods of monetary easing. Talk of quantitative easing and uncertainty as to the way forward will continue to pressure Sterling. Consumer and Retail price indices are due in the UK tomorrow.

US Dollar – US Markets

The US Dollar has strengthened overnight, supported by an increase in risk aversion after the failure of the G7 to produce results. The Dollar has gained to 0.70 versus the Pound and 0.78 against the Euro, as well as strengthening against its major currency partners.

Pressure is mounting on Treasury Secretary Geithner to provide specifics on the Federal Reserve package as markets continue to look to the US for cues in jumpstarting the global economy. A blueprint for recovery in the US would create positive sentiment in US equities and spread around the world, boosting a revival in risk appetite and fuel a growing sense of consumer confidence. News that US GDP contracted 3.8% in the final quarter of 2008 alongside Japanese and European contractions, means uncertainty over growth prospects continues. Wall Street is closed today for a bank holiday in the US.

Euro – European Markets

The Euro has weakened this morning as Friday’s GDP figures and the G7 conference over the weekend fuel an increase in risk aversion. The Euro is currently trading at 1.27 against the Dollar and 0.89 against the Pound.

GDP figures released on Friday showed the deepest contraction on record for the Eurozone in the fourth quarter of 2008. Germany, France and Italy also showed significant contractions and IMF Director Dominique Strauss-Kahn has predicted a ‘second wave’ of weakness as cash strapped governments turn to international organizations for help. European equities are bearish this morning on the back of weak data out from Japan and the UK. The EMU trade balance is out tomorrow.

Other Currencies – Highlights

Japan’s economy shrunk 3.3% in the final quarter of 2008, taking the annual decline to -12.7%. This is significantly more than in the US and Eurozone and has been fuelled by the strong Yen and declining export demand. Japan’s economy is the world’s second largest and is currently in the unique position of having an artificially strong currency despite a deteriorating economic outlook.

The Australian and New Zealand Dollars also weakened overnight as G7 ministers warned of the ‘severe’ global recession that would persist throughout 2009. The Australasian currencies are likely to remain vulnerable as investors dump riskier currencies at a time of unprecedented economic uncertainty.

(c) Currency Solutions – Click Here For Currency Solutions

The Eurozone economy contracted -1.5% in the fourth quarter of 2008, dragging annual growth down to -1.2%. US retail sales figures yesterday showed an unexpected increase by 1% in January, providing a slight boost in risk appetite and allowing the Pound to recover some of the losses made earlier in the week.

Pound Sterling – UK markets

The Pound is gaining on the US Dollar this morning, trading at 1.45 and has gained over 2% on the Yen as a degree of risk appetite has returned with the announcement of better than expected retail sales figures in the US. The Pound has also gained 1.4% on the Euro this morning, trading at 1.12 and is stronger against its Asian and Australasian currency partners.

Positive retail sales figures in the US provided a boost to risk appetite overnight which saw Sterling recover some of the ground lost yesterday. Gloomy industrial production statistics for the Eurozone and an absence of UK data have also helped the Pound to strengthen. This morning Virgin Atlantic has announced 600 job cuts which amounts to 7% of its workforce as recession is affecting long haul travel figures. The recession has also hit the football industry with Chelsea posting a £65.7 million loss in the year to June 2008. Today is light for UK data with consumer and retail price indices due early next week.

US Dollar – US Markets

The Dollar has declined overnight as a degree of risk appetite returns to markets. Sliding 1.6% against the Pound and 0.3% against the Euro, the Dollar is also weaker against its major European and Australasian currency partners.

US retail sales figures released yesterday showed a 1% increase in January, breaking a slide of 6 consecutive months. This gains back one third of the retail spending drop in December and provided a slight boost to equities in an otherwise unremarkable week. The retail sales figures also fuelled optimism that interest rate reductions and monetary easing policy are starting to impact on the wider economy. The price of oil remains in the region of $45 a barrel as unease continues over when the turning point for recovery will be. There is no major data out in the US today.

Euro – European Markets

The Euro is up this morning, recovering from two week lows against the Dollar to trade at 1.29 and is down nearly 1.3% on the Pound to 0.89. The Euro has also gained on the Swiss Franc, Yen and most of its European currency partners.

GDP figures for the Eurozone this morning show the economy has contracted -1.5% in the final quarter of 2008 taking year on year GDP down by -1.2%. The German economy, the Eurozone’s largest, has also contracted by -2.1% in the fourth quarter of 2008, dragging year on year growth down to -1.6%, the worst performance since 1990. Industrial production figures for the Eurozone yesterday showed a -2.6% decline in December, taking annual levels to -12%. This contraction is deeper than UK figures and could be a source of Euro weakness to come. There is no further data from the Eurozone today.

Other Currencies – Highlights

The Australian and Kiwi Dollars remain volatile, subject to macro-economic trends and pressured by increasingly negative economic data. The Australian Senate has passed the AUD42 billion rescue package which was held up in a tied vote yesterday, after reaching a political compromise. The plan includes provision for greater public works spending and is equivalent to 1.3% of Australian GDP. In New Zealand retail spending has declined for the fourth consecutive month and home sales have slumped to their lowest level in 20 years.

Egypt has lowered interest rates for the first time since 2006 as slumping commodity prices have led to easing inflation. The Central Bank reduced the base rate yesterday by 100 basis points to 10.5%. Recession will affect many developing nations through a decline in tourism, trade and remittance income. The Canadian Dollar is faring well as investors seek out the safety of gold as an asset. Figures regarding foreign investment in Canadian securities are due on Monday.

(c) Currency Solutions – Click Here For Currency Solutions

The Pound has slumped overnight, under pressure from negative data in the UK and the return of risk aversion internationally. European and US equities remain lacklustre as the Federal Reserve rescue package has undergone ‘nips and tucks’ in the interest of a compromise in the Senate.

Pound Sterling – UK markets

The Pound has declined sharply overnight, lower against all its major currency partners as the effect of the Bank of England’s report, rising unemployment and increased risk aversion take their toll on Sterling. This morning the Sterling-Euro exchange rate is at 1.10 while the Sterling-Dollar is 1.42. The Pound is also down over 1.8% against the Yen.

Bank of England Governor Mervyn King revealed yesterday he expects the UK economy to contract up to 4% in the first quarter of 2009 and unemployment statistics show the number of jobless at almost 2 million. In his speech King hinted at further unconventional attempts at monetary easing and money supply at a time when growth prospects remain “unusually uncertain”. This uncertainty is dampening investor confidence, particularly at a time when quantitative easing is still on the table as a tactic for consideration. This option is viewed by economists as fraught with risks and would likely have a severely negative impact on Sterling exchange rates. The issue of corporate bonuses is gaining traction in Parliament after RBS claimed it is still to pay up to £1 billion worth of bonuses despite making 2,300 job cuts yesterday. Current predictions are for economic recovery to begin by the fourth quarter of 2009 and carry on into 2010 by when recent monetary easing  policy should begin to impact on markets. There is no significant data out in the UK for the rest of the week.

US Dollar – US Markets

The Dollar has strengthened across the board this morning, benefitting from its reserve status as global equities still remain in negative mode. The Dollar is up over 1% on the Australian, Kiwi and Pound and has gained 0.4% on the Euro.

US market focus remains on the passing of the Federal Reserve package and in the absence of decisive policy action US equities have been lacklustre. Congress is currently moving towards passing a $789 billion rescue package, smaller than the original versions as ‘nips and tucks’ have been made to ensure a political compromise. Economists are predicting the US economy to contract 2% this year and despite Obama’s attempts to create 3.5 million jobs, unemployment is expected to top 8% in 2010. US retail sales figures, a key driver of the US economy, are out today.

Euro – European Markets

The Euro has had mixed results overnight, declining against the US Dollar but gaining on the Pound. The Euro-Sterling exchange rate has climbed to 0.90 while the Euro-Dollar has sunk to 1.28. The Euro is also up on the Aussie and Kiwi Dollars, yet is down against the Canadian Dollar and Yen as investors favour traditional safe havens.

The EUR-USD exchange rate is broaching a weekly low at 1.28 and the Euro is coming under selling pressure while market doubts remain about the effectiveness of the US stimulus package. The ECB monthly report for February cited the extraordinary exchange rate volatility in recent months as uncertainty surrounding the length and depth of global recession has prevented traders from taking up long term positions. European equities remain negative and the Swedish Central Bank cut interest rates yesterday to 1%. EMU industrial production figures are due this morning and GDP for Germany and the EMU are out tomorrow.

Other Currencies – Highlights

Mixed news from Australia this morning as figures show the economy has added 1,200 new jobs, yet the unemployment rate has risen to 4.8%. Business confidence is also at the worst level since 1992. This would suggest the Australian economy is still in the early stages of the downturn and the Australian Government has claimed the economy will contract without the aid of a fiscal stimulus package. The AUD42 billion plan proposed by the Government has been defeated in the Senate in a tied vote. This will force PM Kevin Rudd back to the drawing board and the Aussie and Kiwi Dollars are likely to remain dominated by market focus on risk aversion with US retail sales to be released later in the day.

(c) Currency Solutions – Click Here For Currency Solutions