Buy Currency Online – Excellent Currency Solutions

Foreign exchange rates for the pound remain bearish, sinking to an 11-day low against the single currency yesterday following strong industrial orders in the eurozone. US markets are optimistic this morning amid speculation that Ben Bernanke will be reappointed for a second term, while Israel’s central bank has voted to increase interest rates by 0.25%.

Pound Sterling – UK Markets

Sterling foreign exchange rates continued to slide against the euro yesterday, touching on an 11-day low of 1.1461 following strong European data. This morning the pound is weaker against its major currency partners, sinking to 1.63 against the US dollar and still trading around the 1.14 level against the euro.

Sterling sentiment is weak at present, particularly against the US dollar and euro following news that the eurozone is emerging from recession. The UK is expected to return to growth in the third quarter, with markets predicting a 0.5% expansion and this morning’s figures show UK mortgage approvals have improved for the seventh month in a row, climbing 7.4% in July. There is no UK data today with the Bank of England’s Charles Bean due to speak this afternoon.

US Dollar – US Markets

US foreign exchange rates are stronger this morning, gaining on all its major currency partners with the exception of the Japanese yen. The dollar has gained 0.3% on the pound and 0.14% on the euro to trade at 0.61 and 0.70 respectively.

US markets have opened optimistically following speculation that President Obama will reappoint Ben Bernanke as chairman of the Federal Reserve for a second term. Bernanke is highly regarded for his handling of the financial crisis and the news has led to gains for the greenback this morning. The US housing price index and consumer confidence figures are due today.

Euro – European Markets

Foreign exchange rates for the euro reached an 11-day high against the pound yesterday on the back of positive economic data. This morning the euro has dipped against the US dollar to 1.42, while gaining against the pound and Australian currency to 0.87 and 1.70 respectively.

The 3.1% rise in European industrial orders announced yesterday added to the growing evidence that the eurozone is emerging from recession. This supported euro foreign exchange rates, sending the euro to a multi day high against the pound. This morning’s figures show seasonally adjusted GDP expanded by 0.3% in the second quarter for Germany, while Swiss unemployment has climbed to 3.95 million. There is no further data today.

Other Currencies – Highlights

Australian foreign exchange rates rose to a 13-year high against the pound yesterday, as risk sentiment drove appetite for the higher yielding currencies. A weak pound also helped the Aussie to the 13-year high, and the New Zealand dollar also posted gains on the pound. This morning the Australasian currencies have trimmed gains after Chinese equity markets dipped overnight.

Israel’s central bank has voted to raise interest rates by 0.25%, becoming the first central bank to do so. This has prompted speculation that other central banks will soon follow suit, and the Israeli shekel has gained 0.35% on the pound.

The annual rate of inflation in the UK has fallen below the Bank of England’s 2% target for the first time in 21 months. Today’s calendar is packed with economic data that could cause a reshuffling of currency exchange rates that will potentially benefit some of the higher yielding currencies. Markets will focus on US retail sales figures and the producer price index out this afternoon.

Pound Sterling – UK Markets

Sterling currency exchange rates have recovered this morning, boosted by falling inflation rates in the UK. After touching on a five-week low against the euro and falling to 1.60 against the US dollar yesterday, the pound is currently trading at 1.16 and 1.63 against the euro and dollar respectively.

Consumer prices in the UK have risen 0.3% on the month to June yet the annual inflation rate has fallen to 1.8%. This is the first time in 21 months inflation has fallen below the Bank of England’s 2% target. The retail price index also rose by 0.3% in June and has fallen by -1.6% annually, dragged lower by a reduction in mortgage approvals. These figures could be interpreted positively by markets as an indication that inflation is levelling off. The DCLG house price index has fallen by -12.5% on the year, better than market expectations and inline with observations that the property market could be bottoming out. Tomorrow, average earnings and the unemployment rate are due in the UK.

US Dollar – US Markets

The greenback has lost ground this morning with currency exchange rates declining on the back of positive market data in the UK. The dollar has gained against the yen, Brazilian real and Swiss franc however, as investors diversify from the traditional safe havens.

US equity market staged a minor rally yesterday as a report suggested corporate earnings at Goldman Sachs could rise as much as 15% The S&P closed the day 2.5% up and the boost allowed sterling exchange rates to recover against the dollar. This rally however was complicated by the fact that Larry Summers, an economic advisor to the White House, commented that we may not have seen the bottom for GDP yet and underlying trends remain uneasy. US retail sales and the producer price index will be the focus of foreign exchange markets later in the day.

Euro – European Markets

Euro currency exchange rates are weaker this morning, sinking on the back of downbeat industrial production figures and increased risk appetite. After surging to a five-week high yesterday, the euro has lost 0.5% to the pound while posting gains on the yen, US dollar and Swiss franc.

Eurozone industrial production has fallen 0.5% in May, with the annual rate of decline running at -17%. This is a slight recovery from the -21.6% decline predicted the previous month but is still a massive knock to confidence in the euro. The EUR/USD currency exchange rate has found support at 1.39 after being rejected at 1.40 yesterday. Also this morning the German ZEW economic survey has fallen to -39.5 in July, in contrast to market expectations. As the largest economy in the region, confidence in the German economy is crucial and these figures are likely to affect euro sentiment throughout the day.

Other Currencies – Highlights

Hungarian inflation rates have also unexpectedly slowed in June, falling to 3.7% from 3.8% the previous month. This increases chances of an interest rate cut for Hungary as stable inflation and a less volatile currency are improving investor confidence in the forint. Currency exchange rates for the Hungarian forint have risen to 275.79 per euro this morning. After declining 16% against the euro in the last year, the forint has recovered 5% in the last three months.

Japanese stocks rose overnight, led higher by the US market rally and the expectation of positive corporate earning figures. The yen has lost ground as global confidence rises and markets await results of the Japanese election and Bank of Japan interest rate decision.

The eurozone economy shrank more than previously estimated in the last three months of 2008, figures from Eurostat say. Gross domestic product in the 15-nation area (the figures do not include Slovakia) fell 1.6%, not 1.5% as predicted. The drop is the deepest quarterly fall to date and was brought on by a collapse in external trade.

Pound Sterling – UK Markets

UK consumer confidence fell in March as fears continued about jobs, according to the Nationwide whose confidence index dropped two points to 41. UK unemployment recently hit two million for the first time since 1997. Nationwide said consumer confidence was “broadly stable since the start of the year, but feelings about the current labour market have weakened”. Nationwide’s consumer confidence index has now fallen for nine consecutive months.

US Dollar – US Markets

Dallas Federal Reserve Bank President Richard Fisher has minimised downside risks to the US dollar posed by the US government’s rapidly rising borrowing needs.

In a statement delivered at a forum in Tokyo, Fisher said that problems facing other currencies, such as the euro, were bigger than those facing the United States. As a result, dollar-denominated assets will remain relatively attractive, he said.
Following Fisher’s comments and the Eurostat report, the euro is currently around an interbank rate of 1.308-1.336 against the US dollar this morning, down around 0.6%.

Euro – European Markets

French trade deficit widened in February to EUR4.11 billion from a revised figure of EUR3.71 billion in January – a figure slightly lower than expected – data from the Customs Service showed today. Exports in February fell to EUR28.86 billion from EUR29.29 billion the previous month, while imports also fell to EUR32.97 billion from EUR33.01 billion in January.

The Irish Republic has unveiled its second budget in six months to deal with its rapidly contracting economy. The emergency budget includes a large rise in taxes and a cut in spending, to deal with Ireland’s budget deficit. Finance Minister Brian Lenihan also said an independent agency would take over banks’ bad assets to try and restore lending. His forecast for 2009 was also revised down sharply. He expects it to contract by 8% this year, down from 3% in 2008. Dublin is being forced to deal with a deepening recession while being forced to correct the worst deficit in Europe.

Other Currencies – Highlights

Australia’s Department of Employment and Workplace Relations has said that its leading indicator of employment fell to a negative 0.579 in April from a negative 0.336 in March – the 16th consecutive monthly decline. The indicator measures four weighted time-series variables: ANZ newspaper job ads, Dun & Bradstreet employment expectations, the Westpac-Melbourne Institute leading index of economic activity survey and the Westpac-Melbourne Institute consumer sentiment survey, with the first three of these four contributing to the indicator’s decline in April.

The Australian Bureau of Statistics is due to issue March employment data tomorrow. The jobless rate rose to 5.2% in February, up from 4.8% in January.

Business leaders have warned that UK unemployment will reach 3.2 million in the third quarter of 2010. The British Chambers of Commerce said its survey showed a “worrying deterioration” in manufacturing, with exports reaching 10-year lows. The BCC said one bright spot came in the service sector where the rate of decline appeared to be slowing.

Pound Sterling – UK Markets

UK manufacturing output declined for the 12th straight month in February, while the quarterly measure recorded its steepest drop since records began in 1968, a report from the Office of National Statistics has said.

Although manufacturing output fell 0.9% on the month in February, it compares with a revised 3.0% drop in January and marks the smallest monthly drop since August 2008.

Following the data, the Pound is crawling higher against the US dollar to an interbank rate of between 1.469-1.487, and has risen to an interbank rate against the euro of around 0.9084.

US Dollar – US Markets

The US dollar has risen against the euro and the yen on Monday as American and European stock markets fell lower as recent hopes about economic recovery stalled and investors sought out safe haven currencies. Worries about the financial sector in particular have hit market sentiment hard as banks such as Bank of America, JPMorgan Chase and Fifth Third Bancorp took a series of broker downgrades.

At one point yesterday, the continually weaker Japanese yen dropped to a six-month low against the greenback. The dollar rose to around 101.5 yen before easing back down to around 100 yen.

Euro – European Markets

On an annual basis, retail sales fell by 4% in the eurozone during February, a figure that is 0.6% down from January’s figures. Retail sales have been under pressure from rising European unemployment, which currently stands at 8.5% across the 16-country eurozone.

Other Currencies – Highlights

The Reserve Bank of Australia has cut interest rates to a 49-year low. The cut of a quarter percentage point take interest rates to 3%. Most economists had been predicting no change to rates.

Separately, the Bank of Japan has kept its rates at 0.1%, in line with expectations. However, the Japanese central bank expanded the collateral it will accept in return for loans to commercial banks, now accepting loans on deeds to municipal governments.

A revival in global risk appetite has propelled the South African rand to a near six-month peak against the US dollar. The pair are currently trading around R9.099-R9.139. A surprise contraction in South Africa’s trade deficit and the economy’s resilience in the wake of the global financial crisis have all conspired to boost the rand by around 7% in the past week.

US data released yesterday showed better than expected retail figures for February, and Bank of America announced that they expect to operate profitably in 2009. This led to a surge in equity markets and a rise in risk appetite for investors with the MSCI world index making its biggest rally since November. Japan and China also signalled an increase in efforts to boost growth leading Asian and European equities higher.

Pound Sterling – UK markets

The Pound has risen this morning on the back of improved market confidence but remains trading at low levels internationally. Sterling is currently struggling to find support above 1.4 on the Dollar and remains weak against the Euro.

Yesterday the Bank of England declined to provide ‘sector specific support’ to the ailing automobile industry and this led the Pound to fall against the Euro. This morning the FSA has announced the introduction of more draconian regulations to prevent risky investments being undertaken by banks. With an absence of major data in the UK, Sterling exchange rates are subject to international risk trends and positive retail sales figures in the US yesterday led Sterling to strengthen against its major currency partners. Next Wednesday brings the UK unemployment rate and this will be a source of volatility for the Pound. There is no data in the UK today.

US Dollar – US Markets

The Dollar has lost ground this morning against its international currency partners as better than expected retail sales figures have boosted market sentiment. The Dollar is down against the Pound, Euro, Canadian, New Zealand and Australian Dollars.

US retail sales showed a 0.7% increase in February, a stronger gain than expected revealing an underlying positive trend in the US economy. This news, in combination with the announcement from Bank of America that they expect to make a profit in 2009, sent equities surging yesterday and redistributed funds resulting in better exchange rates for many of the higher yielding currencies against the US Dollar. Also in the US, Bernie Madoff has been jailed this morning for his $50 billion fraud after pleading guilty to all 11 charges. The US trade balance is released this afternoon.

Euro – European Markets

The Euro is holding strength this morning, gaining on the Yen and US Dollar while also trading at favourable rates against the Pound, Australian and Kiwi Dollars.

Despite the release of negative figures from Germany, the single currency gained on the Pound throughout yesterday’s trading. German industrial production fell by -7.5% in January, revising annual rates to -19.3%. This is indicative of the V shaped downturn the Eurozone is experiencing which is affecting Germany’s heavily export orientated economy. Germany is the largest economy in the EU and fifth largest in the world by levels of GDP. Economists suggest the decline in consumer confidence and demand could mean economic policy is to play an increasing role in global recovery. In the Eurozone, this could lead to a redistribution of production to some of the EU’s smaller economies. EMU retail sales are due today.

Other Currencies – Highlights

Asian equities have surged overnight and the MSCI index held its biggest rally since November as Japan and China both announced a broadening of rescue efforts. Speaking from a press conference in Beijing, Chinese Premier Wen Jiabao defended China’s economic policies and announced they expect world growth to return to normal by 2010. The government growth target this year is 8%. In November China announced a 4 trillion yuan (£420 billion) rescue package and international economist suggest years of high growth and a tightly managed budget will support the Chinese economy throughout 2009.

The Japanese Prime Minister has ordered a third government rescue package as the Japanese economy suffers due to the recent strength of the Yen. Japanese consumer confidence and industrial production figures are due today.

European equities have rallied this morning and the US Dollar has declined as markets regain limited appetite for risk. Sterling however, has been excluded from this rally as it remains battered by weak manufacturing and industrial production figures out this morning. Uncertainty over the stability of the UK banking sector is also putting Sterling under pressure.

Pound Sterling – UK markets

Sterling has been pushed to the lower end of trading ranges this morning amid weak production figures and fears over the stability of the UK banking sector. The Pound is currently trading at 1.38 versus the US Dollar and 1.09 against the Euro and has lost ground against the Australian, Canadian and New Zealand Dollar.

Pressure on Sterling has come from the government announcement it is to increase its stake in Lloyds to 77%, the day after the bank ceded control to the government. The Bank of England is also to embark on its new policy of quantitative easing this week and uncertainty over this method is contributing to market unease. Manufacturing levels have fallen further in January, declining -2.9% on the month and -12.8% on the year. Alistair Darling has called on G20 nations to increase their funding to the IMF, stating rich nations have a ‘moral imperative’ to do more in the wake of the global crisis. An increase in scope for the IMF as global regulators is expected to be high on the agenda at the G20 summit in London in early April. The UK property market remains in a deep slump, confirmed by sales between December and February which are at their lowest level in 31 years. The number of new homes being built is expected to decline to 70,000 this year, nearly half that of previous years. Enquiries from potential buyers however, have been increasing as houses have reached their most affordable level in years and interest rates are at an all time low. There is no further data out in the UK today

US Dollar – US Markets

The Dollar is declining this morning, coming down off recent highs from risk averse investors. The Dollar is down over 1% on the Australian and Kiwi Dollars and has lost ground against the Pound and Euro this morning.

The US Dollar is experiencing enhanced safe haven status at present as the Swiss and Japanese economies are coming under increasing pressure. Yesterday Japan posted the largest budget deficit in 13 years following significant declines in it’s level of exports. The repatriation of US Dollars in times of market unease has led to significant Dollar support of late. Economists predict the US unemployment rate could rise to 9.4% and remain elevated until 2011 as the economy recovers from recession. Not only is the growing unemployment rate a symptom of economic decline, it also inhibits recovery through lowered consumer confidence and unfulfilled economic potential. Ben Bernanke is to speak in the US today.

Euro – European Markets

The Euro has rallied against the US Dollar, Pound and Japanese Yen this morning as markets recover limited appetite for risk. The Euro is currently trading at 0.91 versus the Pound and 1.27 against the US Dollar.

Higher than expected earnings at Daimler AG and the European Aeronautic, Defence & Space Co have boosted European equities this morning and in turn, currency exchange rates. However, lack of policy direction from the ECB is still weighing on the Euro as the economic situation continues to decline. Figures this morning show the German trade balance is at €8.5 billion as export markets continue to contract. German CPI has risen 0.6% for the month of January, taking annual inflation to 1%. There is no further data in the Eurozone today with German factory orders out tomorrow.

Other Currencies – Highlights

The Australian Dollar reached 5 week highs against the Pound last night after the Government announced it was to increase its stake in Lloyds to 77%. The Reserve Bank of New Zealand is set to cut interest rates on Thursday and this could lead to a bout of NZD weakness against the major international currencies. Investor demand for the higher yielding currencies is likely to remain determined by risk appetite while the global financial situation remains volatile.

Japanese markets fell for the third day, pushing the Nikkei index to a 26 year low. Japan continues to be battered by reduced demand for its electronic and manufactured goods combined with the strength of the Yen making these products more expensive. Consumer prices in China have declined for the first time since 2002, dropping 1.6% in February from the previous year and threatening growth in the world’s third largest economy. Japanese GDP figures are due tomorrow.

Markets returned to risk aversion on Friday as figures out in the US showed unemployment has reached a 25 year high. The Pound is significantly lower against the US Dollar this morning as the government is set to take control of Lloyds banking group. International equities remain risk averse as the World Bank has predicted the global economy will contract for the first time since WW2 due to the current downturn.

Pound Sterling – UK markets

Sterling has plunged this morning, trading below 1.4 against the US Dollar and losing ground against all its major currency partners amid market unease over the health of the banking sector.

Shares in Lloyds and HSBC have plunged in value amid fears over further losses in the banking sector. Lloyds shares lost 14% in London this morning as the bank ceded control to the government after their 70% nationalisation in return for insurance on over £260 billion worth of risky assets. The British Chamber of Commerce has predicted unemployment will hit 3.2 million, or 10% of the UK workforce by 2010. The BRC regards the promotion of business activity as crucial to lifting the economy out of recession and the government has spent £20 billion since the beginning of the year to increase lending to small business. Industrial and manufacturing production figures for the UK are due tomorrow and the BRC retail sales survey is released.

US Dollar – US Markets

The Dollar has gained on the Euro, Pound and Yen as risk averse investors favour the world’s foremost reserve currency. US equities are in negative mode after dire unemployment statistics on Friday and market fears over the future of AIG.

The US unemployment rate released on Friday showed the economy shed 651,000 jobs in February taking the official unemployment rate to 8.1%. This is a 25 year high for the US and equity markets remain in negative mode this morning. The World Bank has predicted global trade will decline for the most in 80 years and world growth is expected to contract for the first time since WW2. A hangover from massive profit losses at AIG last week is threatening market confidence this morning and AIG has appealed to US regulators for funds for the fourth time since the credit crunch began. The appeal for further aid was made on the basis that failure at AIG would ‘cripple’ world markets as insurance is crucial to supporting the sense of risk a capitalist economy requires. Today is light for US data with the Washington Post Consumer Confidence survey due tomorrow.

Euro – European Markets

The Euro shows mixed results this morning, trading at lower levels versus the Dollar, Yen and Swiss Franc, although the single currency has gained on the higher yielding Pound, Australian and Kiwi Dollars.

European and Asian equities continued to decline this morning on the back of revised growth predictions from the World Bank and market fears over AIG. The economic situation in Russian continues to deteriorate and Russian finance ministers have flown a team of financial experts from Credit Suisse to advise them on how to deal with potential bank nationalisations. The Russian economy contracted 8.8% in the year to January and unemployment is set to hit 10 million. The unemployment rate in Switzerland has risen to 3.1% in February, up from 3% the previous month. There is no major data from the Eurozone today and Germany’s trade balance and consumer price index are due tomorrow.

Other Currencies – Highlights

The Australian Dollar has declined against the US this morning, after falling a total to 21% in 2008. Despite a decline in global trade and reduced commodity demand, the Australian government is optimistic over Australia’s economic prospects moving forward and the RBA opted against cutting interest rates last week. Results of a survey of Australian business conditions are out tomorrow.

The Yen is up this morning, boosted by diminished risk appetite internationally despite the country posting its first current account deficit since 1996. This comes as the Japanese export industry collapses due to the significant contraction of export markets and the high value of the Yen. The leading economic index for Japan is out tomorrow.

Risk trends remain the primary determinant of currency exchange rates this morning as the US cash injection for AIG yesterday renewed fears of institutional failure. Deemed too big to fail by the US authorities, AIG has received a further $30 billion in Federal funding and is now 77.9% taxpayer owned. Markets plummeted around the world on the back of this news sending the Pound and Euro to the bottom end of their trading ranges versus the US Dollar and Yen.

Pound Sterling – UK markets

The Pound has recovered to 1.40 against the US Dollar this morning after hitting 1.39 in the wake of the HSBC announcement that they would be seeking to raise cash to offset profit losses. The Pound is also down to 1.11 against the Euro and has declined 1.7% against the Australian Dollar as the Federal bail out of AIG rattled investor confidence overnight.

The UK FTSE closed on a six year low yesterday after news of a £12.5 billion fundraising drive at HSBC triggered investor fears over further institutional failure. Northern Rock posted a £1.4 billion loss yesterday for 2008 although the bank claims to be ahead of target in paying back the government after being nationalised in February 2008. The construction sector PMI released this morning shows a figure of 27.8 indicating a decline in activity in the month of February. There is unease surrounding Sterling at present as the government moves into a new era of fiscal policy with the approach of quantitative easing. The Bank of England meets on Thursday and economists are predicting a final 0.5% reduction to the base rate.

US Dollar – US Markets

The Dollar spiked overnight against the Euro and Pound as the Federal bail out of AIG heightened investor nerves. However the higher yielding currencies have rebounded this morning with the Euro and Pound clawing back ground to trade at 0.79 and 0.70 respectively. The US Dollar has gained on the Japanese Yen.

Stock and equity markets went into a tailspin yesterday after American insurance giant AIG posted a $61.7 billion profit loss, the largest in US corporate history. The US government provided a further $30 billion of financial aid, taking the amount of taxpayer funds received by the corporation to $150 billion and taxpayer ownership to 77.9%. The Dow Jones and Standard and Poor’s plummeted 4.2% and 4.7% respectively and market declines were felt around the world from Tokyo to London. Treasury Secretary Timothy Geithner will attempt to restore market confidence in a speech later today.

Euro – European Markets

The Euro is climbing against the Dollar and Pound this morning as markets recover some of the ground lost overnight. The Euro has gained 0.6% on the Dollar to trade at 1.26 and nearly 1% on the Yen to trade at 123.76. Against the Pound the Euro remains in the vicinity of 0.89.

Manufacturing activity in the Eurozone fell to the lowest level in 12 years, figures released yesterday show. Despite better than expected figures in January, results for February weighed on the Euro exchange rate and this decline is likely to be reflected in first quarter GDP statistics. Central and Eastern European banks are to be on the receiving end of a €24.5 billion bail out from the World Bank, European Investment Bank and European Bank for Reconstruction and Development. Developing European economies have been hit particularly hard by the credit crunch and the package is a co-ordinated attempt at refinancing and encouraging lending in the region. Austria has seen the cost of its insurance rocket after Moody’s reported Austrian banks are the most exposed to losses in Eastern Europe. Speculation over the ECB meeting could impact on the Euro this week and the ECB meets on Thursday to announce their interest rate decision.

Other Currencies – Highlights

Japanese stocks traded close to 26 year lows on Tuesday after persistent market fears over the further failure of financial institutions. AIG and HSBC have been in the spotlight recently and questions over their financial health sent stock and equity markets to new lows.

Canadian GDP for the fourth quarter of 2008 declined 4.3%, the sharpest quarterly decline since 1991 and this sent the Canadian Dollar lower against the US Dollar overnight. The CAD has recovered losses this morning, currently trading at 1.28 to the US Dollar ahead of the Bank of Canada interest rate decision today.

The Reserve Bank of Australia has voted to leave the official cash rate unchanged at 3.25% signalling an end to the aggressive rate cuts that began in September 2008. This strengthened the Aussie Dollar nearly 2% on the Pound overnight as the Australian government is regarded as ahead of the game when it comes to fiscal policy.

(c) Currency Solutions – Click Here For Currency Solutions

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.

(c) Currency Solutions – Click Here For 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