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The single currency has extended its rally against the pound this morning, gaining support from the release of the German consumer price index and consumer confidence figures. International risk appetite took a hit yesterday as US durable goods orders came in more modest than expected, and currency exchange rates for the yen strengthened in the run up to Japan’s general election.

Pound Sterling – UK Markets

Sterling currency exchange rates continue to fall this morning despite positive housing figures from Nationwide, with the pound falling against its major currency partners. Sterling is currently valued at 1.62 against the US dollar and 1.13 against the euro.

Further losses for the pound yesterday put sterling’s decline as the longest since January against the single currency. The price of UK bonds fell to a record low and the German IFO business climate improved, pushing the euro even higher against sterling. A correction is expected for the pound at some stage, though when this will occur is difficult to say. Nationwide figures show UK house prices gained 1.6% in August, climbing for the fourth consecutive month, while total business investment is down -10% for the second quarter.

US Dollar – US Markets

US currency exchange rates gained over 1% against the pound yesterday after downbeat US figures limited risk appetite. This morning the US dollar is trading at 0.70 against the euro and 0.61 against the pound, while climbing against its European currency partners.

Markets were underwhelmed yesterday by durable goods orders in the US, which rose 4.9% in July, slightly lower than market expectations. However these figures support the idea that the US is recovering across a wide range of sectors and economists are predicting the world’s largest economy will return to growth in the third quarter. GDP figures for the second quarter and initial jobless claims will be a source of currency volatility today.

Euro – European Markets

Currency exchange rates for the euro remain bullish, with the single currency posting its longest rally against the pound since January. The euro has climbed to 0.87 against the pound and dipped slightly to 1.42 against the US dollar.

German data continues to exceed market expectations with the consumer price index rising 0.3% in August. Positive IFO figures triggered a euro rally yesterday and economists are expecting the German economy to support sustained growth by mid 2010. German consumer confidence this morning rose to a 15-month high and EMU consumer, economic and industrial confidence figures are due tomorrow.

Other Currencies – Highlights

A rise in risk aversion following modest US data limited currency exchange rates for the Australian dollar yesterday, sending the Aussie lower against its major currency partners. A 3.3% rise in Australian business investment in the second quarter has added to the view that Australia is recovering, though the Australian and New Zealand currencies remains particularly susceptible to global risk appetite.

Currency exchange rates for the Japanese yen have climbed this morning, due to increased demand for the safe haven while risk appetite remains weak. Unemployment has risen to 5.5% Japan, while consumer prices are declining and export levels have fallen for ten consecutive months. The Japanese election is due soon and the yen could remain strong in the run up to this.

The head of the Organisation for Economic Cooperation has echoed a statement from the IMF by saying that the world economy will most likely shrink this year. Angel Gurria, head of the body that represents the 30 most industrialised nations, said, “We are probably seeing a world which will go negative.”

Pound Sterling – UK Markets

A report from the Confederation of British Industry claims that demand for UK exports has slid to a new low, despite the 25% fall in the Pound over the past year. The business lobby group said that 51% of firms reported that their export order books were below normal in the past month. It is the lowest level for this measure in a decade. The finding will dash hopes that the weak Pound will help support the UK economy throughout the recession. Meanwhile, expectations for export orders remain close to a 30-year low.

Although UK economic data this week has continued to point to a deep downturn, Sterling has risen against the US Dollar today. The US currency set for its biggest weekly percentage fall since the early 1970s after the Federal Reserve’s shock move this week to buy long-term Treasuries.

US Dollar – US Markets

The House of Representatives have voted in favour of a bill to levy a 90% tax on bonuses over $250,000 from firms bailed out by taxpayers. The move follows outrage over the decision by AIG to award its employees $165m in bonuses after taking $170bn in aid from the government. House Speaker Nancy Pelosi said, “We want our money back and we want our money back now for the taxpayers.”

With the Federal Reserve introducing quantitative easing after the unexpected announcement that it will start buying Treasuries, the Dollar is trading near a two-month low against the Euro, and is heading for a record weekly drop. The US currency is on course for a second weekly decline versus the Yen and both the Australia and New Zealand Dollars are also heading for third weekly gains against their American equivalent.

Euro – European Markets

The EU has said it may double the amount of emergency funding to help members in need of urgent budget support to €50bn. European Commission President Jose Manuel Barroso said he was confident the deal would be reached on the final day of a two-day summit in Brussels.

Spain continues to experience one of the Eurozone’s most pronounced economic downturns, with a Spanish Statistics Institute report showing that Spanish industrial orders fell 30% on the year in January, the biggest drop since 2002 when the country began recording the data. Orders for durable consumer goods dropped 33%, while non-durable consumer goods orders decreased 7.8%.

Other Currencies – Highlights

Asian currencies rose, and are heading for their best week against the US Dollar this year, following optimism that stimulus spending plans will avoid a deeper global recession.

South Korea’s Won and Taiwan’s Dollar rallied after central banks in the US, Japan and the UK announced plans to buy bonds, increasing the supply of Dollars, Yen and Pounds. The MSCI Asia Pacific Index of regional stocks was set for its biggest weekly advance since August 2007 and the cost to protect Asian debt outside Japan fell.

Scottish MPs will question senior executives from Royal Bank of Scotland and Lloyds Banking Group – two of the banks given multi-billion pound bailouts by the government.

The Scottish Affairs Committee will hear from Gordon Pell from RBS and Archie Kane from Lloyds, and Alasdair Darling will be questioned further about the massive pension paid to former RBS chief executive Sir Fred Goodwin. Scottish Secretary Jim Murphy has accused Sir Fred of ”banking vandalism” and called his £16m pension fund “extraordinarily distasteful”.

Pound Sterling – UK Markets

A report released by the Office for National Statistics says that the UK public sector borrowed more than expected as central government tax revenue fell sharply on the year and spending continued to rise.

The UK public sector borrowed £9bn in February, a steep increase from £1.1bn a year earlier. Expectations for net borrowing were around £7.7bn and the reported level is the highest February borrowing figure since records began in 1993.

A report from the Council of Mortgage Lenders says that the slump in mortgage lending continued in February with gross lending down by 60% on February 2008. Lending, at £9.9bn, was 15% lower than in January, and was the lowest figure for any month since February 2001. The CML said its members’ ability to lend was drying up because too many savers were choosing to put their money in National Savings policies. Mortgage rationing has led to house sales falling by more than half.

US Dollar – US Markets

The Federal Reserve has said it will buy almost $1.2trn worth of debt to help boost lending and promote economic recovery. The Fed said it would start buying long-term government debt and expand purchases of mortgage-related debt.

The size of the move has stunned investors, and caused the Dow Jones stock index to jump almost 200 points. It is hoped that the measures will boost mortgage lending and the struggling housing market by lowering interest rates on mortgages and other forms of consumer debt.

The news caused a mammoth drop for the US Dollar. The greenback experienced its third biggest one-day decline yesterday since daily pricing began back in 1970, bringing a swift end to the rally that had pushed the Dollar to the highest levels since 2006. The greenback ended the day down against both the Euro and the Pound, and reached a three-week low against the Canadian Dollar.

Euro – European Markets

According to the Dutch National Bureau for Statistics, Dutch consumers are more pessimistic in March compared to a month earlier. The Dutch consumer confidence index stood at -34 in March, falling from February’s reading of -30. The bureau added that consumers have never been so pessimistic about the economy.

The bureau also released a report showing that the Dutch unemployment rate was 4.1% in the three months to February 2009, up from 3.9% in the previous three-month period, marking the third such period in a row in which unemployment has increased.

Other Currencies – Highlights

Excluding the Yen, all of the ten most-active Asian currencies have strengthened against the US Dollar. The Yuan rose to its strongest level this year, as the People’s Bank of China set the reference rate at the highest level in more than three months.

Meanwhile, analysts are predicting that the Indian Rupee will fall beyond record lows in the coming months, as the Reserve Bank of India focuses on supporting the government’s spending measures and attempts to stifle a market sell-off that has driven the yield curve to its steepest levels in 11 years.

Stock markets have recovered from their bout of extreme risk aversion with Sterling and the Euro trimming losses against the US Dollar overnight. Ben Bernanke warned yesterday that the US banking sector is yet to achieve stability and interest rate decision are due from the ECB and Bank of England tomorrow. The prospect of quantitative easing and more unconventional policy is fuelling investor uncertainty which is impacting on currency exchange rates.

Pound Sterling – UK markets

The Pound-US Dollar exchange rate has recovered this morning to 1.40 after sinking to 1.39 following market shocks yesterday. The Pound has also risen to 1.12 on the Euro and has gained against the Australian Dollar and Yen as investors regain some of their appetite for risk.

Consumer confidence in the UK increased by 2 points in February according to a survey by economic analyst Nationwide. This is the first positive movement since October 2008 as falling prices across all areas of the economy are providing good value for money. The CBI business organisation has also reported that while retail sales fell in February, the rate of decline had slowed. Economists are currently predicting an upturn in economic sentiment to begin in the second half of 2009. The credit crunch has reached the broadcasting sector with news this morning that ITV is set to slash 600 jobs. The broadcaster has been hit by reduced advertising revenue and is seeking to trim £65 billion from its programming budget after reporting a 41% drop in profits last year. The Bank of England interest rate decision is due tomorrow and the government is set to announce a variety of initiatives designed to stimulate the UK economy over the coming days.

US Dollar – US Markets

Results are mixed for the US Dollar this morning as a slight increase in risk appetite redistributes funds amongst the higher yielding currencies. The Dollar is up over 1% on the Yen and has gained against the Euro and Swiss Franc while suffering declines against the Pound, Canadian and New Zealand Dollar.

The MSCI World Index gained ground yesterday for the first time in six days following speculation that the US government would increase efforts to improve the economy. European and Asian equities shadowed Wall Street’s gains and currency exchange rates received a boost on the back of improved confidence. However these gains were tempered Ben Bernanke’s warning that the US banking system still had not stabilised and AIG may need to find another source of capital. The viability of AIG is regarded as crucial to the health of the entire financial system due to the sheer scope of its investments. As such, the US government is committed to its success and may have to provide further funds. Employment change figures and the Fed’s beige book are due out tomorrow.

Euro – European Markets

The Euro is broadly weaker this morning against it major currency partners with the exception of the Japanese Yen and the Swiss Franc. The Euro-Sterling exchange rate is currently at 0.89 while the Euro-US Dollar rate is 1.25.

European equities have experienced a mild recovery overnight with the European Dow Jones rebounding 1.5% from its lowest level since 1996. France Telecom, the third biggest phone company in Europe has announced a 35% profit loss for 2008 and European General Motors has asked for a further €3.3 billion in government aid as the recession continues to affect industry giants throughout Europe. The automobile industry is a major casualty of the credit crunch as consumers hold off spending on big ticket items. General Motors in the US has received $30 billion in government aid and is still in a precarious financial position. The German service sector PMI has declined to 41.3 in February while PMI in the Eurozone fell to 39.2 from 42.2 in January. This is a record decline as the Eurozone slashed more jobs than ever this February. There is no further data today with EMU GDP and the ECB interest rate decision due tomorrow.

Other Currencies – Highlights

The Australian Dollar maintained its strength against the US Dollar overnight after the Reserve Bank opted to leave interest rates unchanged at 3.25%. Statistics released this morning show Australian GDP contracted -0.5% in the fourth quarter of 2008 taking annual growth to 0.3%.

The Canadian Dollar touched on a three month low against the US Dollar after the Bank of Canada cut interest rates by 0.5% yesterday. The Central Bank reduced the cost of borrowing to 0.5%, the lowest level on record following a sharp contraction in fourth quarter GDP. The Bank also signalled that more unconventional policy could be employed in future raising speculation of quantitative easing for the Canadian economy.

Global stock and equity markets have plunged around the world following worse than expected US GDP figures released on Friday. The US economy contracted at an annualised 6.2% in the fourth quarter of 2008 and this sent investor confidence plummeting and fuelled a rise in risk aversion. Reports this morning of further trouble in the banking sector and a potential bail out of AIG have kept risk aversion high on the international agenda, capping currency exchange rates.

Pound Sterling – UK markets

The Pound is weaker against the US Dollar, trading at 1.42 as investors remain risk averse in the wake of more negative economic data. The Pound is also down against the Dollar, Yen and Euro and has posted gains on the South African Rand and New Zealand Dollar.

Further trouble in the banking sector has put Sterling under pressure this morning as banking giant HSBC has announced a £12.5 billion fundraising drive to underwrite losses as a result of the credit crunch. HSBC is Europe’s largest bank and has recently revealed a 62% drop in profits. This news sent bank shares 10% lower this morning. Lloyds is also making headlines after striking a deal with the Treasury to insure £250 billion worth of bad debts through the Asset Protection Scheme. Lloyds is currently attempting to keep government ownership below 50%. UK Manufacturing PMI this morning is distinctly bearish, coming in at 34.7 and the Engineering Employers Federation (EEF) has predicted 140,000 manufacturing jobs will be lost as a result of the credit crunch. The EEF has predicted the manufacturing sector will contract by 8.6% this year. The extent of government support for the banking sector is likely to support the Pound in the long term yet Sterling remains vulnerable at present. The construction sector PMI is out tomorrow and the Bank’s interest rate decision is due on Thursday.

US Dollar – US Markets

The Dollar is broadly stronger this morning, gaining on all it’s major currency partners with the exception of the Japanese Yen as low investor confidence favours safe haven currencies. The Dollar-Pound exchange rate is currently 0.70 while the Dollar-Euro rate is at 0.79.

Figures on Friday revealed the US economy shrunk an annualized 6.2% in the fourth quarter of 2008 while consumer spending declined 4.3%. These figures were worse than expected and sent global equities into retreat over the weekend. Consumer confidence accounts for 70% of GDP in the US and as such, is closely linked to business confidence and market sentiment. This news, combined with reports that AIG may need a further cash injection has sent Wall Street along with European and Asian equities plummeting and served to strengthen the US Dollar this morning. Last week the Federal Reserve agreed to convert up to $25 billion of Citigroup shares into common stock to support the bank during credit crisis. Personal income and spending figures are due in the US today and this is also likely to impact on market confidence.

Euro – European Markets

Results are mixed for the Euro this morning, having declined against the US Dollar, Yen and Swiss Franc while posting gains against Sterling and the New Zealand Dollar. The Euro-Pound exchange rate is currently 0.88 while the Euro-Dollar exchange rate is 1.26.

The Purchasing Manager Index released in Germany this morning is down to 32.1 for the month of February as manufacturing orders have decreased sharply with contracting export markets. The Purchasing Manager Index for the Eurozone fell to 33.5 for February, a figure largely in line with market expectations. European equities are weaker this morning due to a surge in risk aversion following the reported nationalisation of AIG. The UK FTSE fell 3.2% while Germany’s Dax index fell 2.76%. Eurozone unemployment has risen more than expected in January, while inflation reached its lowest point in 10 years. The ECB is expected to provide a 0.5% reduction in the base rate when it meets in Thursday.

Other Currencies – Highlights

The Australian and New Zealand Dollars declined against the Pound late last week after risk aversion heightened with weak GDP figures from the US. The RBA interest rate decision is due tomorrow and this will be a source of volatility for the Aussie Dollar. South Africa has managed to lower its unemployment rate despite economic contraction, as the construction industry added jobs ahead of the next FIFA world cup. The unemployment rate declined to 21.9% with the jobless number falling from 4.12 million to 3.87 million.

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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.

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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.

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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.

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Sterling has taken a dive against its major currency partners as the UK unemployment rate has risen to 6.3%. Global equities are in negative mode after market reaction to the Federal Reserve rescue package was luke-warm, fuelling gains in the safe haven currencies overnight.

Pound Sterling – UK markets

Sterling has declined across the board overnight as investors favour risk aversion and following news that the UK unemployment rate rose 0.2% in January. Sterling is currently trading at 1.44 versus the Dollar and has dropped to 1.11 against the Euro. The Pound is also down over 1.5% on the Yen to 129.

The UK unemployment rate has risen to 6.3% in January, a 0.2% rise in line with market expectations. This could have a bearing on Sterling exchange rates throughout the day as unemployment is closely linked to personal consumption and business confidence. The former Chief Executives of RBS and HBOS faced the Treasury Select Committee yesterday to explain the failure of the banking system. Under a grilling from MP’s the RBS Former Chief Executive Sir Fred Goodwin apologised for the banks failure yet RBS, of which the taxpayer now owns 70%, later announced 2,300 job cuts. The Bank of England’s £50 billion facility to purchase assets becomes operational this Friday and the Bank’s Quarterly Inflation Report is due today at 10:30 am.

US Dollar – US Markets

The Dollar has gained from an increase in risk aversion overnight yet equities remain in negative mode after details of the rescue package failed to inspire confidence in markets. The Dollar is down to 0.77 on the Euro and has gained 0.6% on the Pound.

Wall Street took a plunge yesterday as the much anticipated speech from Treasury Secretary Timothy Geithner failed to address the tough issues and quell investor fears in the US. In the eyes of investors three factors need addressing immediately by the Federal Reserve; how to stop banks failing, how to alleviate toxic debt, and how to stimulate property and credit markets. Geithner’s speech yesterday was short on specifics and heightened fears that a drop in confidence at this early stage could sabotage the entire package. The Standard and Poor’s declined 4.9% following the announcement and crude oil has fallen back to $45 a barrel amidst unease surrounding the US economy. Trade balance figures are out in the US this afternoon.

Euro – European Markets
The Euro has strengthened overnight, benefitting from the increase in risk aversion and grim UK unemployment figures. The Euro-Sterling exchange rate has climbed to 0.89 and the Euro is up to 1.29 on the US Dollar.

Despite the ascending Euro, equities remain in negative mode this morning, taking their cue from US markets. Switzerland’s second largest bank Credit Suisse, announced a $5.2 billion write down in the fourth quarter of 2008. This is significant in that the bank avoided the worst of the sub-prime crisis, yet was hit by the Lehman shocks in its investment sectors. Credit Suisse is to cut 5,300 jobs and shares plummeted yesterday. Car manufacturer Peugeot also posted losses and this dragged European equities down. The German Consumer Price Index is confirmed at -0.5% this month taking yearly inflation to 0.9% supporting the case for further rate cuts from the ECB in March. There are no major announcements in the Eurozone today and the ECB monthly report is due tomorrow.

Other Currencies – Highlights

Chinese export levels have plummeted 17.5% due to the global recession and these figures have been reflected in the shrinking trade deficits of major Chinese importers. The Aussie and Kiwi Dollars weakened overnight as risk aversion returned and boosted the safe haven currencies as the US bail out plan failed to inspire market confidence. Australian business confidence and unemployment rate is due tomorrow and New Zealand retail sales figures are released on Friday.

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Trading is volatile this morning ahead of the Bank of England and ECB interest rate decisions due this afternoon. US unemployment figures have risen by over 500,000 in January alone and shares in Europe’s major banks have declined as Swiss Re and Deutsche Bank have reported massive profit losses for 2008.

Pound Sterling – UK markets

Sterling is trading at 1.44 against the US Dollar and 1.12 versus the Euro having strengthened ahead of the Bank of England interest rate decision. The Bank of England is expected to cut the base rate to a new historic low of 1% this afternoon. The MPC decision will be weighed against Britain’s plunging inflation rates, thousands of jobs losses and increasingly grim economic climate. The NISER predicted a -2.7% contraction for the UK economy and the IMF has claimed Britain will be one of the worst hit by the current recession. While significant monetary easing has been undertaken alongside rate reductions, in future the Bank will have to look to increasingly unconventional policy measures. Icelandic investment group Baugur has become the latest high profile victim of the credit crunch after filing for bankruptcy protection yesterday. Baugur owns shares in high street giants Hamley’s, Iceland and House of Fraser and is expected to fold with debts of over £1 billion. The rate decision is to be announced at noon and is likely to be a source of volatility for the Pound.

US Dollar – US Markets

The Dollar has remained largely unchanged overnight, down against the Pound and Australasian currencies this morning. Equities suffered yesterday after it was revealed the US private sector slashed 522,000 jobs in January. Today a series of soft data is released in the US but markets are likely to be dominated by events in the UK and Europe. The US unemployment rate and non-farm pay roll figures are out tomorrow.

Euro – European Markets

The Euro is down to 1.28 versus the US Dollar and 0.88 against the Pound as current exchange rates reflect uncertainty surrounding the ECB decision. Last month ECB President Trichet signalled rates would not be cut further until March although falling inflation and rising unemployment in the Eurozone are mounting pressure on the ECB to act. EMU retail sales announced yesterday have fallen flat, showing a -1.6% contraction for the year to December. Deutsche bank has suffered its first annual loss, posting a €3.9 billion write down for 2008 and Swiss Re has gained a £1.8 billion cash injection from investor Warren Buffett. This news led to a negative day for European equities yesterday from which they have still not recovered. Norway’s national bank has cut interest rates to 2.5%. The ECB decision is this afternoon to be followed by a speech from President Trichet.

Other Currencies – Highlights

The Australasian currencies suffered overnight as worse than expected employment figures in the US triggered a round of panic selling. The New Zealand unemployment rate has risen to 4.6% as global recession is taking its toll on the minor economies through a downturn in tourism, trade and international investment. A monetary policy statement from the Reserve Bank of Australia is due tomorrow and this is likely to include scope for further interest rate reductions and government cash injections. Qantas shares fell 18% in trading yesterday as the outlook for tourism figures remained bleak.

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