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An index measuring confidence among business professionals in the UK has risen the most in over two years, as speculation grows that the UK will end its recession in the third quarter. News that Thailand has emerged from recession and improved sentiment from Ben Bernanke led to gains in Asian trading overnight, with yen and US dollar foreign exchange rates falling as demand for the safe havens diminishes.

Pound Sterling – UK Markets

Sterling foreign exchange rates are relatively unchanged this morning, slightly down against the US, Australian and Canadian currencies, while recovering some of the ground against the euro lost on Friday. Sterling is currently trading at USD1.64 and EUR1.15.

The Institute of Chartered Accountants has seen confidence among business professionals rise by the largest amount in two years, as the UK is expected to return to growth in the third quarter. The index leapt from -28.2 at the end of March to 4.8 at the end of June. The London FTSE has gained ground following the news. This week is light for UK data, with nationwide house prices released tomorrow.

US Dollar – US Markets

US foreign exchange rates are slightly higher this morning against the yen, euro and pound while declining against its Asian currency partners. The dollar is currently valued at EUR0.69 and GBP0.60.

Comments from Ben Bernanke that growth prospects for the US economy “appear good” helped fuel a rise in risk appetite overnight with Asian markets gaining ground. The pound reached an 11-day high against the dollar last week after US house prices continued to rise for the fifth consecutive month. This week brings more housing data in the US, along with consumer confidence and durable goods orders.

Euro – European Markets

Euro foreign exchange rates are slightly weaker this morning, losing ground against all its major currency partners with the exception of the pound, Swiss franc, yen and South Korean won. The single currency is currently trading at USD1.42 and GBP0.86.

The euro continued is rally in Friday’s trading following news that business expectations in Germany and France rose to their highest level in over two years, supporting the view that their economies are recovering. This morning industrial new orders in the eurozone rose 3.1% in June, while still declining at an annual rate of -25.1%. There is no major data in the eurozone today.

Other Currencies – Highlights

In Asian markets Thailand is the latest country to join the growing list of those emerging from recession. In combination with improved confidence from Ben Bernanke, this has fuelled gains in Asian stock markets this morning, where markets from Hong Kong to South Korea have gained ground.

The Japanese yen has weakened against the euro for the third consecutive day, as growing optimism is capping demand for the safe haven currencies. The yen also declined the most against the Australian and South Korean currencies, and is currently valued at 135.63 per euro.

Sterling currency rates remain neutral this morning after the UK posted a record budget deficit in July, the lowest since 1993. UK retail sales also reported a modest rise, climbing 0.4% on the month. Today is light for economic data in the UK and eurozone, with the US leading index set to affect international currency rates.

Pound Sterling – UK Markets

The trend in sterling currency rates remains neutral this morning with the pound trading at 1.65 against the US dollar and 1.16 against the euro. The pound has also gained 0.3% against the yen and is up slightly against the Canadian dollar.

Sterling lost nearly a cent against the euro yesterday after the MPC minutes showed the Bank of England was split on its quantitative easing policy. CBI distributive trades also came in slightly worse than expected at -54. This morning’s figures show retail sales rose 0.4% last month and 3.3% on the year, while public sector borrowing is running at GBP8 billion. The US leading index could be a source of volatility for the pound later in the day.

US Dollar – US Markets

Currency rates for the US dollar are mixed this morning as the greenback climbed against the yen and pound while declining against the euro and Asian currency partners. The US dollar is currently trading at 0.70 versus the euro and 0.60 versus the pound.

The US leading index is released today and positive figures are expected to show the recession is drawing to a close. Recent figures show evidence of stock building, higher export levels and fewer job losses, though economists are quick to point out that there remain a number of large barriers to sustainable recovery, most notably unemployment which is set to reach 10%. The Philadelphia Fed is also released today and this will provide and important snapshot of the manufacturing industry.

Euro – European Markets

Euro currency rates rose this morning after a volatile day in equity markets yesterday. This morning the single currency is marginally higher against the pound, US dollar, Canadian dollar while declining against the Australian and New Zealand currencies.

European stocks have recovered this morning which could boost euro sentiment today. The ZEW survey for Switzerland came in better than expected at 18.6, and the trade surplus rose to CHF2.5billion. There is little data out in the eurozone today, with euro currency rates likely to be affected by the US leading index released this afternoon.

Other Currencies – Highlights

Currency rates for the Japanese yen fell against the euro and dollar overnight as a rebound in Chinese stocks improved risk appetite. The South African rand and South Korean won gained the most against the yen as higher yielding currencies rallied, boosted by optimism over global recovery.

Australian and New Zealand currency rates are lower this morning against the pound and US dollar, despite rebounding stocks in China. The Australian central bank has made a record AUD sale based on the view that foreign exchange markets are stabilising. The AUD has gained 18% against the US dollar and is currently trading at 1.20 per US dollar.

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Both the ECB and the Bank of England opted to leave interest rates unchanged yesterday, at 1% and 0.5% respectively. The Bank of England also opted to leave QE levels unchanged. Today foreign exchange markets will be interested in US employment data and this could influence the underlying dollar trend in the coming week.

Pound Sterling – UK markets

UK foreign exchange rates have declined from the seven-month high against the dollar and five-month high against the euro earlier this week on the back of political uncertainty in the UK. Despite positive economic figures, news that the Labour government is facing MP resignations dragged the pound down to 1.60 against the dollar and 1.13 against the euro. UK foreign exchange rates have also declined against a basket of international currency partners.

The UK producer price index out this morning has hit a multi-year low, largely on the back of falling oil prices. Yesterday, the Bank of England voted to keep interest rates on hold at 0.5% and maintain current levels of quantitative easing. This led to investor optimism that the MPC plan to stimulate the economy may be working. However despite the positive news, the fragile political situation has been negative for sterling exchange rates. Today, foreign exchange markets in the UK are likely to be affected by US employment data and political news from the government.

US Dollar – US Markets

Results are mixed for the US dollar this morning as foreign exchange rates have been volatile in the run up to the release of US employment data. The dollar has declined against the pound and euro this morning, but has gained against the yen, Canadian dollar and South African rand.

Employment data released in the US today is likely to be the major influence on foreign exchange rates internationally as the labour market is central to global recovery. The current market consensus is for a 0.3% rise in the US unemployment rate to 9.1%. Yesterday the US currency dipped in response to concern over the dollar’s status as an international reserve  although this ground has been recovered this morning. Average hourly earnings, the non-farm payroll and official unemployment rate are released today.

Euro – European Markets

Foreign exchange rates for the eurozone have improved this morning with the euro currently trading above 1.4 against the US dollar and 0.88 against the pound. The euro has also gained against the yen and Canadian dollar while losing ground to the Aussie and Kiwi currencies.

The ECB left interest rates unchanged at 1% yesterday and President Trichet commented that they may remain on hold for some time, as the euro economy is expected to begin a gradual recovery in 2010. With the eurozone expected to experience a greater downturn than the UK, euro foreign exchange rates may be slightly bearish versus the pound in the short term. There is no data due in the eurozone today.

Other Currencies – Highlights

The Australian and New Zealand dollars rose for the third consecutive week against the yen as investors favoured the higher yields based on speculation that the global recession is abating. An interest rate decision from the Reserve Bank of New Zealand is due next week and the NZD could experience some volatility in the run up to this. In the meantime, global foreign exchange trends based on US employment data are likely to affect foreign exchange rates for the Kiwi and Aussie currencies.

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.

Equity markets remain neutral this morning ahead of retail sales figures and jobless claims due in the US this afternoon. Stocks posted minor rallies yesterday as JP Morgan Chase announced a profit in the first two months of 2009 although risk trends continue to drive international currency exchange rates.

Pound Sterling – UK markets

The Pound remains in the doldrums this morning, having lost ground against the US Dollar, Yen and Euro as investors favour risk aversion in the midst of deepening recession. Lacklustre trade data has kept the underlying trend in Sterling neutral.

Market reaction to the first gilt auction held by the Bank of England yesterday was muted and unease surrounding quantitative easing continues to weigh on the Pound. Yesterday official statistics revealed the UK economy in deficit to the tune of -£3.5 billion for goods and services in January. The deficit in traded goods fell to -£7.7 billion which is compatible with weaker industrial production figures for January. Sterling remains extremely weak internationally and the March unemployment rate will be a source of volatility for markets. Budget supermarket chain Morrison’s has announced a 7% increase in profits on the back of higher sales during the credit crunch. Today there is no data of note from the UK and Sterling is likely to be driven by international risk trends.

US Dollar – US Markets

The Dollar is gaining ground this morning against its major currency partners as investors remain risk averse. The US Dollar is up over 1% on the Australian Dollar and Indian Rupee, while it has lost nearly 1.5% against the Yen as demand for safe havens continues.

US equities gained yesterday as JP Morgan Chase joined Citigroup in announcing a profit in the first two months of 2009. While it may be premature to say this indicates an end to the downturn, it does suggest greater stability in the banking sector and this was a source of confidence for equities in the US, Europe and Asia. US jobless claims and retail figures are due today and this is likely to be a source of volatility for currency exchange rates as retail sales are regarded as an important driver of the domestic and global economy. The US trade balance is out tomorrow.

Euro – European Markets

The Euro remains low against the US Dollar, Yen and Swiss Franc this morning amid speculation that industrial production figures for Germany are likely to be negative. The Euro continues to strengthen over the Pound and is trading at higher levels against the Australian and Kiwi Dollars.

The EMU producer price index has fallen -0.1% for January and is expected to show a 0.5% increase for the year. Recession continues to gather pace in the Eurozone and industrial production figures for Germany, the largest economy in the region, are expected to confirm this. ECB President Trichet has recently stated that ECB interest rates are likely to stay above 1% and this reluctance of the ECB to act is weighing on the Euro. Central Banks around the world have slashed interest rates in response to the credit crisis and the ECB remains curiously behind the curve. However, the ECB overnight deposit rate is 0.5% – the same as the MPC base rate – and this is helping to drive interest rates down for European banks. The ECB monthly report is due today and the Swiss interest rate decision is due tomorrow.

Other Currencies – Highlights

In Australasian markets, the Reserve Bank of New Zealand cut interest rates by 0.5% to 3% in an attempt to kick-start the economy yesterday. The reduction was in line with market expectations and the Kiwi rose to a two week high against the US Dollar following the announcement. In Australia the unemployment rate has risen to 5.2%, up from 4.8% the previous month. Unemployment is now at the highest level in 4 years and recession could be looming on the horizon for the Australian economy. New Zealand retail sales figures are due tomorrow and the unemployment rate is released in Canada.

GDP figures for Japan this morning show the Japanese economy shrunk -3.2% in the fourth quarter of 2008, taking annualized GDP down to -12.1%. This contraction is the steepest since 1974 and fuelled further gains in the Yen as investors sought to limit their risk by buying the perceived safe haven currencies.

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.

The Bank of England announced yesterday that it is to take unprecedented steps to ease the recession; £75 billion will be injected into the British economy over the next three months.

Pound Sterling – UK markets

The Bank will embark on quantitative easing next week, a measure that will see more money printed, after the monetary policy committee cut the bank rate for the sixth time since October. The rate is now 0.5% – a level previously unseen in the Bank’s 315-year history.

Mervyn King, the Bank’s governor, said it was unlikely that the bank rate could go any lower and policymakers are now focussing on creating money instead. Chancellor Alastair Darling has given the Bank permission to create £150bn – 10% of the annual output of the economy – by purchasing government gilts and commercial assets.

Gilt prices rose sharply following the announcement, but stock markets on both sides of the Atlantic suffered a heavy sell-off amid concerns that the health of the insurance sector had been jeopardised by the credit crunch.

Halifax, Britain’s biggest mortgage lender, said house prices fell by 2.3% in February and were almost 18% lower than a year ago, while the Society for Motor Manufacturers and Traders said sales of new cars were down 20% on February last year.

Following this was news that the board of Lloyds Banking Group met last night to consider a government-backed deal to insure up to £250bn of its most troublesome assets. If the deal goes ahead, the bank’s management would have to cede majority control to the state.

All this meant that the Pound tumbled. The Dollar gained against the sterling and the Euro on the back of the interest rate cuts. The Pound slid to 1.1221 against the Euro and is now around 1.4220 against the Dollar.

US Dollar – US Markets

However, the US Dollar dropped more than a one percent against a host of currencies overnight, reversing these recent gains, as investors braced for data that is expected to show that the US jobs market took a severe knock in February.

Economists expect the US economy lost a massive 648,000 jobs in February, with the unemployment rate rising to a 25-year high. Speculation that the figure could reach 1 million has hit the Dollar hard.

Although recent bad economic news has tended to be positive for the Dollar as investors have flocked to the perceived safety of the U.S. currency, analysts said investors’ immediate reaction to talk of such a horrendous number was to sell.

The Euro gained 1 percent against the Dollar to 1.2695.

Euro – European Markets

The European Central Bank cut its interest rates yesterday by half a percentage point, down to 1.5% – the lowest level since single Euro rates were introduced in 1999. ECB president Jean-Claude Trichet said interest rates could fall further from their current level but he stressed that they were already very low.

The ECB also slashed its inflation forecasts from 1.8% to 1%. The new inflationary target is significantly lower than the ECB’s stability objective of 2% and gives them scope to lower rates further.

Other Currencies – Highlights

The Swiss franc was a major gainer, with the Euro tumbling to a four-month low against the currency, with analysts saying the Swiss unit has briefly resumed its safe-haven status amid intensifying concerns about a severe global economic downturn.

The Australian Dollar reached a two-day low against the Euro.