But firstly, what do we define as the current and future climate?

1. Frequently volatile in the short-term
2. Record government deficits threatening the most “secure” of investment products
3. Poor equity performance
4. A forecast for a high inflationary environment post QE alongside continually weakening currencies.

As a result we believe that inflation hedging investments in tradable assets are the way with which we can best preserve our wealth.

Two excellent choices therefore are gold and wine. Should you only be able to invest in one or the other, which should you choose? Below is an objective comparison and at the very least, some food for thought when considering these asset classes:

• Quick income - neither are income producers unless they are bought in bulk and sold off individually (whilst also timing the market precisely) so they must be held for a period of time (typically 12 months minimum, 2-5 years usually)

• Recent performance – From November 2008-9, Gold was up 50%. The Lafite Rothschild 2008 made 45% gains in 9 months.

• Ongoing returns – the difference between gold and wine is that wine is essentially a number of products with differing shelflives and maturing ages, whereas gold is only the one product. For example, the Lafite 2008 might make 50% gains in total. You may then sell and buy a different vintage, the Mouton 1996, which also experiences 50% gains. Gold, after one 50% rise, is unlikely to continue growing at 50% per annum, as would any singular product/share/stock, etc. Therefore it will struggle to stick with those ambitious growth forecasts in the long term.

• Supply – Gold’s supply is well documented as dwindling which is likely to keep prices high, at least in the short-term and whilst markets remain volatile. It is why you see so many “cash for gold” adverts in the UK. Vintage wine supply is more unpredictable although a vintage generally decreases in availability as it gets older and gets consumed! What happens with wine is as one vintage ends, another begins, giving the investor ongoing opportunities. A good broker is an essential tool when understanding supply and the knock-on effect of when to exit the market.

• Demand – both products are likely to experience high levels of demand, at least in the short-term. Gold is the inflation hedge, and wine because its price point is perfectly poised to retain consumption from all levels of the investor spectrum. At £8,000 per case approx., the entry level investor can afford it, and so can the multi-millionaire. The rich may not be buying £20m yachts at the moment, but high quality vintage wine still represents a tiny % of disposable income. It is also worth noting that wine (along with make-up), are 2 of the best performing products in any recession. When the population feels down, they tend to cheer themselves up with alcohol.Demand for both has also had a big shake up geographically. Traditional old money is being added to in huge volumes by new money as well as emerging nation demand from high population countries such as Brazil, China and India.

• Durability/Storage – both products can come with storage and ultimately protection. Wine bottles can break, and therefore gold may be considered more durable. However, the strength of storage, plus insurance, means you are now well covered in this unlikely eventuality.

• Your economic viewpoint – Should you believe the world is going to recover, it is likely that gold has reached it peak and will not provide further returns, if not future losses. If you believe the opposite to be true, gold could, as some forecast, treble in value. Vintage wine is less likely to be disturbed by economic cycles, but one must conclude that the less demand, the more volatile the pricing could be there.

Although both products are strong investment contenders in a volatile, downturning market, gold relies on certain economic conditions to rise in value whereas wine does not. In a market that continues to go down, in particular coupled with a weakening currency and inflation, gold would continue to rise in value. However, wine would also rise as a fellow tradable asset (as has been seen with the rises in vintage value in the last 2 years).

Ultimately wine has a more subtle manoeuvrability compared to gold in that wine is not one product, it is several products, born at different times, with natural price peaks based on its age rather than its dependency on the economic cycle.

Therefore, if you can, it is wise to diversify into both asset classes. Both are strong products, but if you cannot, your economic viewpoint will be crucial as will your investment performance requirements. If you strongly believe the economy is yet to sink to the bottom (and has a long way to go as well), gold is your best bet. If you are looking for more flexibility within varying market conditions, wine is a much better prospect.

The investment concept exists because of the need of many farmers for short-term funds. This is down to either expanding or restructuring their businesses, particularly in light of many new EU directives which require new and costly upgrades. Farmers, as is widely known, are cashflow poor but are extremely asset rich, an asset which can be used to generate an income. This asset is of course their farmland.

What many investors are unaware of is how robust farmland prices actually are. Documented evidence shows that since records began in 1945, UK farmland prices have remained steady in each of the recorded recessions and in many places have barely dropped at all in the last 2 years. Therefore it is important for investors to understand that UK farmland is not affected by economic cycles in the same way as residential or commercial property does. Evidence from a number of independent sources is available in our packs.

So why are farmland values so robust? It is a question of supply and demand. In the UK , farmland for sale is a rare occasion and an exceptional opportunity for a neighbouring farmer to expand his business. In 1945, 1m acres per year were recorded as transacted. The numbers since then have steadily decreased to only 100,00 acres, a huge 90% drop in supply. This has been in the main because farmers have moved from tenants to actually owning their own land. Farms are passed down the generations and in order to succeed, the farmer needs to expand not contract. Therefore a chronic lack of available-for-sale supply coupled with a farmer’s ongoing expansion requirements ensure that values remain robust, regardless of lifestyle buyers. What this means to investors is that farmland, as part of a farm, is a robust product when protecting capital that also produces an ongoing income.

With the lack of funding available from banks, farmers are prepared to enter into leaseback style agreements for their farmland with private investors for an agreed timeframe of typically 2,5 or 10 years. The investor buys a portion of the farmland (usually not the property) at between 50-70% of today’s market value and rents it back to the farmer at around 8% per annum; a very competitive rate in today’s marketplace. Typically the farmer will also pay for the buying costs. The farmer pays his “rent” and then buys the farmland back from investor at the end of the agreed period for the same % discount based on the then market value. Therefore this offers the investor a superb capital gain opportunity and allows the farmer to improve his business profitability in the short-term.

Strong leaseback deals will utilise an agricultural project management team, (as we do), to ensure that a new business plan is in place and so that the farmer is monitored on a quarterly basis for the investor. This ensures a smooth, hands-off and full managed product that so many investors fear they will not otherwise receive. The product is also SIPP/SAAS compliant.

With regards risks, with such a strong initial equity position, you would need UK farmland to fall by more than 30% in order for your capital to be at risk; something which has not happened since records began, nor is it likely when taking into account global demand for food and the fact that we still have not found ways of making food without the use of farmland!

So in difficult economic times, it is possible to find deliverable, high income, secured products. If you wish to find out more, please register or email enquires@discoverandinvest.com

This is not the first time we have experienced a recession, and as tends to happen, governments spend their way out of them. New infrastructure projects, more public sector jobs, and that now oh so familiar phrase, Quantitative Easing, or QE. In other words, the government is flooding the markets with money to stimulate action.

Although deflation has been an equally used buzzword in 2009, as the lack of demand has in some instances had a downward effect on pricing, the smart discussions revolve around inflation, the natural consequence of “too much money chasing too few goods”. Inflation, that by-gone concept of the 1970s! In fact inflation is all around us, with a particularly constant pressure on currency over the years. How many remember when a chocolate bar was 10p?

Although there is a split between forecasters, significant evidence points toward a higher inflationary period and an increasingly weak Sterling/Dollar fuelled by unprecedented government debt. Current house price rises, driven by a lack of available supply are likely to be short-lived rather than upward demand (as sellers wait for prices to go back to “break even” levels) , as the resultant supply increase will outpace demand does increase through higher interest rates. The stock market is having one of its roughest periods on record. Therefore, where can investors look for not only safety, but also results?

In volatile times coupled with vulnerable and weakening currency values, tradable hard assets become investments of choice. The likes of gold, silver, farmland, wine and stamps have proven to retain value in tough times as the measurement and value of cash becomes uncertain. Regardless of the measurement of exchange, or currency, these products show value and become excellent locations to park and secure wealth whilst the world begins anew.

Throughout January and indeed 2010, we will explore inflation hedges in more depth, with the next blog giving investors a comparison of the available options. There are some cracking opportunities even in these times, so I look forward to welcoming you back for another instalment in the next few days.

In the current climate and to help educate, below are the top 10 reasons to invest in UK Farms:

No over-supply, robust local demand

It has been said many times regarding land, and it is as true today as it ever was, they are not making anymore of it. On top of this, less and less parcels each year are coming onto the market to be sold. According to Reed Business Information’s The Farmland Market Report, there is a huge dearth of land for sale and the volume of sales has been on a steep decline since in 1950. 1 million acres were traded then compared with around 100,000 in 2008; only 10% of the previous high. This is mainly down to the fact that there are many more landowners now than 60 years ago and most do not look to sell unless absolutely essential.

As a result oversupply issues that have hit the commercial and residential property markets are highly unlikely to effect the farmland market. In fact, evidence from experts shows that farm prices remain stable in this and previous recessions and are going up slightly compared to residential property.

As for demand, levels remain strong from local farmers, who are always interested in local businesses as they tend to be “once in a lifetime” opportunities to buy. The only drop has been from lifestyle buyers, who make up a much smaller percentage of the overall market.

Excellent defensive investment against inflation

It is widely regarded that higher inflationary times are around the corner given the extraordinary levels of global government spending combined with the rare sight of extremely low interest rates at the base of a recession. The value of currency has always been eroded by inflation and the next few years may see this increase. There is much talk of a global currency in the future if fiat currencies continue to decline in value. Therefore, the smart investors are looking for tradable assets which can retain their value in more volatile times. UK Farms, and in particular the primeland that they sit on, present such an opportunity to investors.

Tax/pension benefits

Depending on the type of vehicle used, a number of tax reliefs are available to investors, such as Inheritance Tax relief. It is also worth noting that in many cases, farmed land qualifies for SIPP and SASS, the popular UK pension schemes.

The UK presents an extremely secure environment

Due to the UK’s property and land laws, the country is considered one of the safest environments to invest in globally. Although returns may be higher in emerging markets, those investments quite often carry a very high degree of risk.

Undervalued due to weak Sterling

Not only is the UK secure, but its prime farmland can be considered undervalued. The first of these reasons is down to the currency movements. Sterling has declined sharply over the last 18 months, which effectively means the country has a “30% off” sale sign over it. International investors who buy now will have the benefit of profiting from any reverse currency movements as the economy improves.

Buy at 70%, re-mortgage at 100% of the valuation

The second reason for the argument of value is that farms can be picked up in the UK at around 70% of their valued price. This presents not only a capital gain opportunity but also presents a liquidity opportunity. Banks will lend at 100% of the valuation which means an equity release is entirely possible.

8-15% yields achievable

Depending on the project, 8% yields are achievable in the UK; with leaseback deals buying at 60% LTV, the yields are as much as 15.9% based on a project available right now. Compared to the options available in the UK ie. Bank deposits 1%, volatile stock market, property yields dropping below 5%, income is a particularly pleasant current upside for investors.

Buyback option can provide extra investor security

One facet of investment that is always of concern is the exit strategy. If a lease agreement is in place, investors can have extra security that the tenant farmer will buy the farm back at an agreed price level 2,5 or 10 years into the future. If they cannot, this would trigger an event of default, which raises the next benefit of farm investments.

Strong evidence shows farms sell quickly

Again, mainly due to the lack of supply in the marketplace, farms and farmland usually takes 3 months to sell from agent instruction. If you are investing through the right companies, there should be an all-in-one solution available in terms of managing and selling the farm, either by choice or in event of default.

Investment period as little as 18 months

If the farm has been purchased and leased back to the farmer, the investment period can be as short as 18 months. Therefore tie up of capital is the same period unless you are able ot release equity and also allows for potential capital gain opportunities.

Therefore there is a lot to like about farming and agriculture from an investment point of view, particularly in today’s market.

Great news to tell you about, wine investing is the place to be! Our clients received information regarding the outstanding yield curve for the ‘1982’ vintage with strong evidence and support for the nearest equivalent ‘1996’ and ‘2003’vintages to potentially emulate performance. As of the last two months the ‘96’ has seen a hike of 11.76% which now means it is up 19% since March, the ‘03’ likewise by 4.7%……We conclude that both these wines as well as some select counterparts are trading at higher prices and are now entering a period of likely significant growth based on the same supply and demand characteristics previously outlined.

The wine investment market has rallied since the beginning of the year as the industry index for the top 100 wines moved by 1.5% per month; however the star performer amongst these wines has clearly been Chateau Lafite Rothschild. Several vintages have provided strong, tax free returns this year and more significantly, two of the vintages strongly recommended to Discover & Invest clients have performed as we had predicted.

Therefore a strong argument for the increase in further value remains and is also being echoed by the financial press, as demonstrated by the recent Daily Telegraph article below:

‘Lafite prices climb as investors pile into wine’. Telegraph, 1st August 2009

The graph below gives some perspective on the Lafites, particularly over the last year or so of turbulence. The relatively low price point for this luxury item compared with cars or yachts means its basement point is quite high. In other words, demand remains robust because buyers at both ends of the wealth spectrum are able to buy and continue to speculate.

Pound Sterling - UK Markets

Sterling is sliding this morning against its major currency partners with the release of first quarter GDP figures showing the UK economy contracted significantly in early 2009. This morning the pound has slid over 1% on the euro, yen and New Zealand dollar, and 0.4% against the US dollar.

ONS statistics show the UK economy contracted -1.9% in the first quarter of 2009. This follows a -1.6% contraction in the previous quarter and was substantially higher than the -1.5% predicted by most economists. This takes the annual growth rate to -4.1%, a contraction significantly larger than the 3% predicted by Alistair Darling earlier in the week. Retail sales figures, a key indicator of consumer spending, rose 0.3% in March. Sterling is likely to continue its bearish run today as these figures, along with the 12.4% budget deficit, play on the minds of investors. Credit agency Moody’s has also expressed concern over the levels of government borrowing, which is set to reach GBP175 billion this year, prompting concerns the UK may lose its AAA credit rating. There is no further data in the UK today.

US Dollar - US Markets

The dollar is weaker across the board this morning, down 0.9% against the euro and yen, gaining only on the pound in terms of the major currencies.

The growing perception of ‘green shoots’ emerging in the US economy this week has supported a series of rallies in markets, boosting some of the higher yielding currencies at the expense of the dollar. Solid corporate earnings from Bank of America and Citigroup and increased funding from G20 nations have contributed to the view that the worst of recession may be easing. These rallies however, remain capped by bouts of negative data, with news that home sales fell 3% in March renewing concerns over the property market. The Federal Reserve’s methodology for stress testing banks is released today with results of the tests due on May 4. Market opinion currently is that the purging of toxic assets is far from over and the extent of credit write downs could damage positive sentiment in weeks to come. Durable goods orders and new home sales are out today.

Euro – European Markets

The euro has gained across the board this morning, strengthening to test 1.32 against the US dollar and gaining over 1.3% on the pound. The single currency has dipped slightly against the yen, Swedish kronor and Swiss franc.

The euro has benefitted from a glut of negative data released in the UK this week and rallies in equities supporting slightly higher risk appetite. Economic data yesterday showing the pace of recession in the Eurozone easing also boosted confidence and the euro has moved to consolidate on this support. This morning, figures show the German IFO business climate and expectations rose to 83.7 and 83.9 respectively, which bode well for the rest of the region. There is no further data from the Eurozone today.

Other Currencies - Highlights

The Australian and Kiwi dollars have capped off a week of declines against the yen on concerns that recession will reduce demand for the export products of the two nations. Next week markets are likely to focus on the Reserve Bank of New Zealand’s interest rate decision where a 0.5% reduction is expected, and the National Bank of Australia’s business confidence survey.

Pound Sterling - UK Markets

The pound dipped to 0.90 versus the euro yesterday after the announcement of “eye watering” government debt in the UK rattled markets. Sterling lost ground the euro and dollar throughout the day but appears to have been given the benefit of the doubt this morning, maintaining support above 1.45 and 1.11 on the dollar and euro respectively.

The UK budget announced yesterday has been subject to in-depth economic analysis and will continue to do so over the coming days. Among the headline grabbers was Darling’s top tax rate of 50% and predicted growth contraction of 3-3.5% for 2009. Higher tax levels raised the issue of competitiveness internationally and prompted speculation that top investors would keep their money elsewhere. The government also confirmed the view that a weak pound in the short term will give export markets a much needed boost. The budget deficit, predicted to reach 12% of GDP, put gilt prices under pressure and sent Sterling exchange rates lower. Unemployment, the housing market, auto sales and the ‘greening’ of new industry also took precedence in the new budget. Bank of England minutes released yesterday showed the MPC unanimously voted to maintain current interest rates and quantitative easing levels. To cap off a big week in the UK, GDP figures and retail sales are due tomorrow.

US Dollar - US Markets

The dollar has weakened this morning, down over 0.5% against the pound, Australian and Kiwi dollars as positive news from the Eurozone has revitalised investor confidence. The dollar is currently in the vicinity of 0.68 against the pound, 0.76 against the euro and 98 against the yen.

Renewed concern over the banking sector caused a drop in equities late in the day yesterday as markets continue to oscillate between positive and negative territory depending on the latest set of data released. News that Morgan Stanley operated less profitably than expected, combined with the IMF report that contradicted UK growth predictions caused a plunge in risk appetite but markets have rallied this morning on the back of positive news from the eurozone. Initial and existing jobless claims, as well as new home sales for March are due in the US today.

Euro – European Markets

The euro has rallied this morning, boosted by a flight from sterling following the announcement of the UK budget and on the back of economic data showing recession easing in the eurozone. The euro is currently trading at 1.30 against the dollar and is up to 0.89 against the pound.

The German purchasing manager index out this morning has shown decline at the slowest rate in 5 months in both the manufacturing and service sectors. Industrial new orders for the eurozone also dropped less than expected and the EMU current account came in a EUR-8.1 billion. In addition to the news that Credit Suisse operated profitably for the first quarter of 2009 and French economic sentiment rose for the second consecutive month, this has supported the euro and moderated market opinion that the eurozone is becoming more entrenched in recession. The Swiss ZEW survey is due later in the day with Germany’s IFO business climate and expectations survey due tomorrow.

Other Currencies - Highlights

The Australian dollar continue to tread familiar ranges against the dollar and euro but spiked against the pound overnight as sterling was battered by low growth predictions and high budget deficits from the UK budget. Core inflation in Australia remained relatively high and economists predict the central bank is nearing the end of its interest rate reductions. Poor results for Morgan Stanley sent the New Zealand dollar lower as risk appetite diminished and comments from New Zealand finance minister Bill English, that New Zealand may be in its sixth quarter of recession also hurt the Kiwi currency. The Australian and New Zealand dollars are trading in the vicinity of 2.04 and 2.59 respectively.

Pound Sterling - UK Markets

The pound has weakened this morning against most of its international currency partners in the run up to the budget released today. The pound is trading in the vicinity of 1.45 against the US dollar and is down 0.5% against the euro with further exchange rate volatility likely throughout the day.

This morning’s budget is expected to be the most negative in a generation predicting a 3-3.5% growth contraction for 2009 and a deficit climbing to 12% of GDP. The government is also expected to announce plans for spending cuts and rising tax from 2011 along with moves to revitalise the property market and create thousands of new jobs in the UK. Minutes from the last Bank of England meeting also released this morning are likely to have little affect on markets as it remains too early to asses the effects of quantitative easing. The ILO unemployment rate has risen to 6.7% in the three months to February and public sector borrowing has increased to GBP19.1 billion, significantly ahead of market expectations. Also this morning, HM Revenue and Customs has announced a 40% jump in home sales for March. The budget is released at 12:30.

US Dollar - US Markets

The dollar has gained against the pound and euro this morning as uncertainty over the UK budget and fallout from the IMF report are weighing on the major currencies. The dollar is trading in the region of 0.68 versus the Pound and 0.77 versus the euro and has gained on the Canadian, Australian and New Zealand currencies.

A speech from Treasury Secretary Geithner’s yesterday led markets to a brief rally as he reassured investors of bank balance sheets. Equity markets and currency exchange rates are largely determined by the prevailing mood regarding the banking sector at present as this determines international appetite for risk. The USD-GBP exchange rate will likely be affected by the UK budget released today and we could see a weakening of the pound against the dollar. US mortgage applications and the housing price index for February are released later in the day.

Euro – European Markets

The euro continues its bearish run of the currency markets this morning, trapped below 1.3 against the US dollar and 0.89 against the pound. The euro has also declined against its Asian currency partners as details of an IMF report predict a long and entrenched recession for emerging European nations.

Positive news yesterday came in the form of the German ZEW economic survey which showed a surprise rise in confidence from -3.5 to 13. However, the fact that the euro failed to fully capitalise on this speaks volumes about market perception surrounding the Eurozone at present. Continued uncertainty from the ECB and details of the IMF financial stability report are weighing on the euro. The IMF forecast yesterday that European banks could face more substantial write downs and require greater capitalization than US banks. The IMF also expects a net investment loss to Eastern Europe with little hope of recovery in 2010 and 2011. There is little of note in the Eurozone today with the EMU current account, purchasing manager index and industrial new orders released tomorrow.

Other Currencies - Highlights

The yen advanced overnight as Japanese trade balance figures show the slump is slowing down. March export figures snapped a four month spell of record losses and this, in combination with worries over what further stress tests could expose in the US, caused the yen to advance on a basket of international currencies.

The Bank of Canada cut interest rates to a record low of 0.25% yesterday and plans to leave it there until inflation returns to its 2% target. The Canadian economy is expected to shrink 3% this year and the central bank is expected to announce a framework for quantitative easing on Thursday. This is weighing on the Canadian dollar at present. Leading indicators are published today.

Pound Sterling - UK Markets

Sterling has declined against the US dollar, finding support just above the 1.45 level, as a wave of risk aversion swept markets overnight. This morning the pound is largely unchanged against the euro, trading in the vicinity of 1.12 and is down over 1% on the New Zealand dollar.

Inflation figures out this morning show consumer prices falling in the UK. The core consumer price index for March is running at 2.9%, taking the annual rate of inflation to 1.7%. The retail price index is running at 0% for March, taking the annual rate to -0.4% largely due to falling house prices and lower interest rates. The lower cost of energy is also fuelling the downward trend and this is helping to bring inflation inline with the government target of 2%. This morning Tesco has reported a GBP3 billion profit, a 10% rise since the last financial year. We can expect some volatility for the pound during the rest of the week with Bank of England minutes, the annual budget, ILO unemployment rate and continuing jobless claims out tomorrow.

US Dollar - US Markets

The US dollar strengthened overnight, trading in the vicinity of 0.77 versus the euro and 0.68 versus the pound as credit losses at Bank of America prompted fresh fears over the stability of the financial sector. This morning the higher yielding currencies have trimmed losses against the dollar with the pound, Aussie and Kiwi dollars all staging minor rallies.

Bank of America’s corporate earnings released yesterday show that despite a USD4.2 billion first quarter profit, the bank will be forced to set aside over USD13 billion to cover toxic loans. This ends up close to a break even performance and the news rattled markets, renewing fears that the worst of the recession may not be over. Bank of America shares lost 24% while Citigroup shares declined more than 16%. The news also affected global equities with the S&P closing down 4.3% and the Dow Jones losing 3.6%. The losses also put an end to the 6 week rally in global markets and economists predict markets are entering a phase of short term consolidation with credit losses expected to get worse before they get better. In the US today Treasury Secretary Geithner is to make a speech and the Washington Post Consumer Confidence survey is due.

Euro – European Markets

The Euro continues to fall against the dollar, reaching a five week low of 1.28 during Monday’s US session and remains bearish this morning. Against the pound the euro staged a slight recovery yesterday and the euro has also declined against the Australian and New Zealand dollars.

Statistics released in Germany this morning show the producer price index fell -0.7% in March, taking the annual rate to -0.5%. The public debate between ECB members over the best course of action for the Eurozone continues to pressure the single currency in the absence of any positive financial data. Uncertainty over the pending ‘unconventional measures’ from the ECB is making investors nervous although a reduction in the base rate by 0.25% seems likely. Results of the German ZEW economic sentiment survey are due out this morning.

Other Currencies - Highlights

Asian equities fell across the board yesterday, triggered by renewed fears over the state of the financial sector in the US. The yen ended three days of gains against the euro and dollar although recent signs of improvement in the Chinese economy have acted as a buffer to drastic selling. Also this morning the Indian Central Bank has reduced the repo rate, at which the bank makes short term loans into the economy, by quarter of a percentage point to 4.75%. This is the sixth time since October the rate has been reduced and the Indian Central Bank expects growth to slow to 6% this year. The Canadian Central Bank is to make an interest rate decision today.

Pound Sterling - UK Markets

Sterling has lost ground against its major currency partners this morning, having declined over 1% against the US dollar and Japanese yen as the looming budget puts pressure on the pound.

The CBI have predicted the UK economy will contract 3.9% in 2009 with a total economic contraction of 5.1% by the end of the recession. This is more than twice the decline predicted by Alistair Darling in his pre-budget report and Wednesday’s budget is expected to downgrade economic forecasts while highlighting increased government borrowing. However recent economic news shows the pace of decline is slowing in both the US and UK and the CBI expects the economy to return to positive growth by the second half of 2010. While the pound remains weak internationally, this could aid recovery through more competitive pricing and there is a reported 1.8% increase in house prices in March. There is no major data released in the UK today.

US Dollar - US Markets

The dollar is stronger this morning, reaching a one month high against the euro and gaining over 1% on the pound after a better than expected performance from Citigroup on Friday boosted Wall Street and global equities. Citigroup reported a profit of USD1.6 billion, its first in nearly 2 years and this improved market sentiment and added to the view that the US economy may be taking its ‘first steps’ towards recovery.

Today Bank of America, Google and Yahoo are to release corporate earning figures and this could lead to a further revival of risk appetite. The leading indicators index is also out today and this is expected to show an easing of recession in the US as Federal cash injections and lower interest rates are work to boost spending and investment. Consumer confidence figures and jobless claims are due out later in the week.

Euro – European Markets

The euro has declined against the US dollar and yen this morning but improved against the pound ahead of the UK budget due on Wednesday. Dropping below 1.3 versus the US dollar, the euro has reached a one month low amid concerns the ECB is not doing enough to protect the eurozone economy. The euro has also hit a 3-week low against the yen.

As the US and UK economy are starting to show signs of the recession easing, the decline appears to be deepening across the eurozone and this, along with mounting concerns over the effectiveness of the ECB is placing the euro under pressure. Comments from ECB members Axel Weber and President Trichet last week also increased speculation of further interest rate cuts. There is no major data released in the eurozone today with Germany’s producer price index and ZEW economic sentiment survey out tomorrow.

Other Currencies - Highlights

Currency exchange rates for the Australian and New Zealand dollars continue to shadow investor appetite for risk. After reaching a 6-month high against the euro on Friday with news of Citigroup profits, the Aussie and Kiwi dollars have slumped this morning with rumours of splits in the ECB leading investors to favour the safe haven currencies. Figures out this morning show Australian producer prices fell 0.4% in the first quarter of 2009 and are running at a 4% increase on the year.

The yen continues to strengthen despite declining export figures and the deteriorating Japanese economy. The Bank of Japan is expected to slash economic forecasts this week as consumer demand collapses and the Japanese economy is expected to contract by 4.2% in 2010. Japan’s leading economic indicators and Canadian foreign investment figures are released today.