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

Pound Sterling - UK markets

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

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

US Dollar - US Markets

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

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

Euro – European Markets

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

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

Other Currencies - Highlights

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

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

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

Pound Sterling - UK markets

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

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

US Dollar - US Markets

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

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

Euro – European Markets

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

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

Other Currencies - Highlights

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

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

It was a thin day of trading across London yesterday as snow blanketed the city, wreaking havoc with transport networks and forcing 1 in 5 workers to stay at home. The weather placed even more pressure on small business owners already feeling the effects of the credit crunch.

Pound Sterling - UK markets

The Pound is slightly weaker against the Euro and US Dollar this morning as negative manufacturing data and the Bank of England interest rate decision continue to pressure the Pound. Currently at 1.42 versus the Dollar and 1.10 versus the Euro, the Pound is also down against its European and Australasian currency partners.

Yesterday was a negative day for UK equities as shares in transport companies declined due to the disrupted service and Barclay’s shares plummeted after their credit rating was cut by Moody’s. Heathrow suffered its worst day since September 11 2001 and labour strikes across Northern oil refineries continued to disrupt production. Official figures show UK manufacturers cut jobs at a record pace in January, with over 30,000 lost and employment prospects remain grim. Predictions this morning claim an extra 2000-3000 businesses could go bankrupt if the bad weather continues and more snow is expected across the UK. There is no further data in the UK today with consumer confidence figures released tomorrow.

US Dollar - US Markets

The Dollar is gaining on the Pound and Euro this morning as both currencies are under pressure ahead of interest rate decisions on Thursday. The Dollar is also up on the Yen and down against the Aussie and Kiwi Dollars.

Iconic department store Macy’s is to cut 7000 jobs or 4% of its workforce as a result of recession in the US. GM and Chrysler, having received a $17 billion dollar bail out from Congress, are under increasing pressure to make their industries more viable and justify the Federal expense. President Obama is also seeking to promote US industry and include greater protection against foreclosures in his economic stimulus package that is currently seeking Senate approval. The Washington Post Consumer Confidence survey is released in the US today.

Euro – European Markets

The Euro has declined against the Dollar this morning, down to 1.28 after widespread contraction across the Eurozone manufacturing sector. The Euro has gained against the Pound and other European currency partners.

German retail stales have declined for the third consecutive month and the German economy is expected to contract 2.25% this year. As the largest economy in the Eurozone with a significant export sector, this could place even further pressure on the Euro as we move into 2009. BP has reported a 24% drop in quarterly profits which sent shares plummeting this morning. This comes after Royal Dutch Shell announced a 10% profit drop in the final 3 months of 2008. Terms of the US rescue package have UK and European exporters worried as a ‘Buy America’ clause aimed at stimulating US iron, steel and manufacturing industries, could also promote protectionism. The EMU Producer Price Index is out today with retail sales figures due tomorrow.

Other Currencies - Highlights

The Australian government yesterday took decisive action against ‘severe global recession’ slashing interest rates to an historic low of 3.25% and the announcing a $42 billion rescue package. However, this has also created concerns about the growing budget deficit and global recession is keeping the Australian and New Zealand Dollars vulnerable. Downturn in the worlds’ major economies has reduced demand for export goods and ensured risk aversion remains a feature of international trading. The New Zealand unemployment rate is released tomorrow.

A snowstorm sweeping London is keeping trading thin today as adverse weather conditions disrupt transport routes across the capital. An estimated 20% of people have not made it into work at a cost of billions of Pounds to the UK economy.

Pound Sterling - UK markets

The Pound is currently trading at the firmer level of 1.41 against the US Dollar and is up to 1.10 versus the Euro. The financial centre of South East London has been severely affected by disruption to transport networks making it a thin day of trading for the capital.

Sterling strengthened on Friday against the Dollar and Euro as better than expected figures showed mortgage lending had improved in December. The Federation of Small Businesses (FSB) is estimating the cost of the snowfall at £1.2 billion as approximately 20% of people cannot get to the office today. PMI for the manufacturing sector remained weak in January, although statistics show an unexpected rise to 35.8 from 34.9 the previous month. Further survey data out this week will provide a good indicator of UK economic prospects moving into 2009. The US and Eurozone are the UK’s biggest export markets and downturn there will impact heavily on UK manufacturing and industrial orders. The MPC is to meet later in the week with a 0.5% reduction expected. There is no further data from the UK today.

US Dollar - US Markets

The US Dollar has regained ground this morning, trading at 0.70 versus the Pound and 0.78 versus the Euro. The Dollar is also up against the Asia Pacific and other European currencies as risk aversion was revived on Friday with the announcement of GDP figures.

Fourth quarter statistics showed the US economy contracted at record pace in 2008, confirming a technical recession for the world’s largest economy. With contraction expected to continue into the first quarter of 2009 this highlights the need for an economic stimulus package in the US. Personal spending figures out in the US this morning show a decline of 1% in the month of December and pending home sale are released tomorrow.

Euro – European Markets

The Euro is currently gaining on the US Dollar and Pound as London trading is severely affected by a blizzard in the capital. The Euro has recovered some of its recent losses, suffered as a result of weakening data from the Eurozone. The Euro is currently trading at 0.90 versus the Pound and 1.27 versus the Dollar.

Negative data continues to flow from the Eurozone with Friday’s regional unemployment rate showing a 0.2% rise in December to 8%. Manufacturing figures from Eastern Europe show a rapid decline in January for Hungary and the Czech Republic with Poland declining at a less rapid pace. Manufacturing has contracted across the region in January and the ECB is coming under increasing pressure to cut interest rates further. Their decision is due on Thursday.

Other Currencies - Highlights

The Australian and New Zealand Dollars have taken a hammering overnight as risk appetite fell away with the release of historically weak GDP data in the US. Both currencies are significantly weaker as risk aversion continues to pressure the trade based economies. Downturn in their major export partners is also contributing to a gloomy economic outlook. The New Zealand unemployment rate is out tomorrow.

UK GDP has contracted -1.5% in the fourth quarter, taking annual growth rates to -1.8% confirming an entrenched recession. Growing speculation that the government will have to move to more unconventional policy measures is turning investors away from the Pound, while economic uncertainty internationally is supporting the US Dollar.

Pound Sterling - UK Markets

Sterling has continued to decline this morning, down to 1.35 against the US Dollar and 1.05 versus the Euro. Uncertainty over the financial crisis, spiralling government debt and negative economic data are all placing Sterling under severe pressure.

UK GDP contracted -1.5% in Q4 2008, taking year on year growth to -1.8% and confirming the deep economic downturn in the UK. CBI industrial trends show order books at their lowest level since 1991 and this is expected to be reflected in manufacturing figures for January. Retail sales increased 1.8% in December as the reduction of VAT and heavy discounting drew people into stores during the Christmas period. The drastic sell off of Sterling is coming from a lack of confidence in the financial sector and in the ability of government to provide assistance. Growing speculation that the government will need to take a more unconventional policy approach, combined with soaring debt levels and shrinking share prices are battering investor confidence. Conservative leader David Cameron has sparked outrage this morning with his comments that Britain may need to seek IMF assistance as government debt levels soar to £71 billion. Short selling is back in the spotlight and may face further bans. There is no further data in the UK today

US Dollar - US Markets

The Dollar is up 1.6% on the Pound and 1.4% on the Euro, supported by a combination of risk aversion and rallies in equity markets as President Obama and his team get to work in Washington. The Dollar has also gained on its major Asian and European currency partners.

US Treasury Secretary-nominee Timothy Geithner announced yesterday a strong Dollar was beneficial to the US economy and equity markets rallied, supporting the Dollar even further. The underlying trend in equities is still unstable as investors are unsure how to respond to plans of nationalization and the world waits for monetary easing policies to trickle through. There is no data out in the US today.

Euro - European Markets

The Euro is showing mixed results internationally, lower against the traditional safe havens yet stronger against the higher yielding currencies. The Euro is currently at 1.28 versus the Dollar and 0.94 versus the Pound.

Figures this week show recession becoming more entrenched in the Eurozone. German PMI for manufacturing and services has contracted sharply in January, Spain’s unemployment level has hit 13.9% and French business morale is at an all time low. PMI for services and manufacturing for the Eurozone show the European economies are deep into recession territory. There is no further data from the Eurozone today.

Other Currencies - Highlights

The Australian and New Zealand Dollars have gained against Sterling but are weaker against the US Dollar. Rallies in US equities have triggered a recovery in risk appetite allowing the Australasian currencies to strengthen over Sterling. The RBNZ is expected to cut interest rates by 1% next week.

Chinese GDP has shrunk to 6.8% in the final quarter of 2008, taking annual growth rates to 9% in 2008. Although significantly higher than most developed nations, this is the weakest figure in seven years. Growth is targeted at 8% in 2009 and the Chinese government has recently released a 4 trillion Yuan stimulus package.

The Pound declined to a 6 year low against the Dollar yesterday as market confidence was shattered by the announcement of the largest profit loss in history from RBS. The EU has revised growth predictions downwards to -1.9% for 2009 and equity markets are awaiting a fiscal stimulus package announcement from the US.

Pound Sterling - UK Markets

The Pound is down nearly 3% against the US Dollar, trading at 1.39 this morning and has slumped against its other international partners as market confidence was battered by RBS profit losses yesterday. Sterling has also slipped back to 1.07 versus the Euro.

The Pound reached a 6 year low versus the Dollar and RBS shares closed down 67% yesterday as the largest profit losses in corporate history shattered investor confidence. The British government announced £100 billion worth of financial aid and that it would increase its stake in RBS to 70% yet this did little to calm nerves as government debt continues to spiral. This morning RBS shares have recovered 17% of yesterday’s losses but the tone of equity markets remains negative. December inflation has fallen to 3.1% from 4.1% in November on the back of lower energy prices and heavy discounting from retailers. This will have a bearing on MPC decisions in future and minutes of the last meeting are published tomorrow. The European Commission yesterday forecast the UK economy would contract 2.8% in 2009. Fourth quarter GDP figures are out on Friday.

US Dollar - US Markets

The US Dollar is substantially stronger, reaching a 6 year high against the Pound yesterday and gaining against the Euro, supported by a combination of risk aversion, weak international data and optimism surrounding the inauguration of President-Elect Obama.

Obama is expected to announce a fiscal aid package outlining the US road to economic recovery when he takes office this week. Equity markets are likely to remain nervous until the scope and scale of the package are announced. Market focus will turn to North America today with the inauguration of President Obama and the Bank of Canada interest rate decision due.

Euro - European Markets

The Euro strengthened over the Pound yesterday, jumping 2% to 0.92 as Sterling was battered by the release of the largest profit loss in history from RBS.

The ZEW Survey reported that German investor confidence has improved following ECB interest rate reductions. This also comes amidst an EU report revising European growth forecasts down to -1.9% for 2009 painting a somewhat mixed picture for the Eurozone. Yesterday Spain had its credit rating cut by the Standard & Poors, following Greece last week with Portugal and Ireland still under watch. Losses in the UK banking sector were reflected in European equities. There is no further data from the Eurozone today with the German producer price index out tomorrow.

Other Currencies - Highlights

The Australian and Kiwi Dollars slumped against the US Dollar yesterday as weak equity markets and further risk aversion supported the Dollar. The Aussie and Kiwi Dollars are both up against the broadly weaker Pound this morning as RBS profit losses and market unease is still overshadowing government initiatives to provide support to the banking sector. Global economic contraction is continuing to weigh on commodity prices and Aussie Dollar in particular.

The Canadian Dollar is stronger this morning ahead of an interest rate decision from the Bank of Canada later in the day. Japanese consumer confidence figures and New Zealand retail sales are also announced today.

The ECB reduced its base interest rate to 2% yesterday in a move that was widely expected by markets. A volatile day of trading saw Bank of America shares lose over 20% and the London FTSE 100 also closed with significant losses. Consumer inflation and industrial production figures from the US are likely to be the major market movers today.

Pound Sterling - UK markets

The Pound strengthened against the US Dollar overnight, trading just below 1.5 this morning and is up 1% on the Euro to 1.12 following the ECB decision.

A turbulent day of trading saw the FTSE tumble in response to uncertainty in US equity markets yesterday. Lloyds shares fell by 11% while Barclays and HSBC suffered 8% and 7% declines respectively, wiping out the hard won gains after the recent market shocks. This morning the Pound has strengthened against the Dollar and Euro as Congress rescue packages and ECB rate cuts increased risk appetite internationally. Economists are predicting a return to positive growth in the fourth quarter of 2009 at present as it takes 1-2 years for rate reductions to work their way through the economy. There is no data out in the UK today.

US Dollar - US Markets

The Dollar has suffered against its major currency partners as a barrage of negative US economic data this week has allowed Sterling and the higher yielding currencies to consolidate against the Dollar.

Bank of America has been granted a $138 billion rescue package by Congress this morning which includes $20 billion of financial aid and $118 billion worth of guarantees. Shares in the Bank and Citigroup slumped yesterday ahead of profit losses which are expected to be larger than initially thought. The Philadelphia Manufacturing Survey showed the weakest performance in 40 years and underlying market trends remain bearish. The inauguration of President Obama next week and the announcement of further Congressional rescue packages are likely to be a source of market optimism next week. Economists are predicting upturn in the US economy could begin in quarter 2 at the earliest and is likely to precede recovery in the UK and Eurozone by around 3 months. The Consumer Price Index and Industrial Production Figures are out in the US today.

Euro - European Markets

The Euro has continued to lose ground against the Pound this morning, trading at 0.88 and 1.32 versus the Dollar.

Yesterday the ECB cut the base interest rate by 0.5% to 2%. This was widely expected by markets as industrial production and inflation figures have shown the Eurozone economy in rapid decline. Inflation fell to 1.6% in December from 2.1% the previous month prompting predictions that a short period of deflation may occur. Greece, Ireland, Spain and Portugal are the latest members of the Eurozone to be put on credit alert by the Standard and Poor’s which added to pressure on the Euro. Trichet ruled out the further interest rate reductions until March in his accompanying speech. The EMU trade balance is out today.

Other Currencies - Highlights

The New Zealand and Australian Dollars continue to remain vulnerable to international movements in the absence of important economic data. New Zealand house prices fell 2.7% in December, which weighed on the New Zealand Dollar yesterday and the Aussie lost 0.9% against the US Dollar overnight. The Central Bank of Turkey is due to make an interest rate decision today although consumer inflation figures in the US are likely to be the major market movers.

The ECB is under pressure to reduce the cost of borrowing today following a sharp reduction in industrial production in the Eurozone. The Euro is weaker this morning ahead of the decision and the Dollar has been supported overnight by underlying bearish market trends.

Pound Sterling - UK Markets

The Pound is 1% higher against the single currency amid expectations of an interest rate cut from the ECB. Sterling has gained slightly to 1.46 versus the US Dollar.

More profit losses from the High Street this morning as Argos and Curry’s announced a 10% decline in sales figures in the three months to January. UK markets barely registered the Government’s £20 billion finance package for small businesses yesterday although the Pound has continued to strengthen over the Euro ahead of the ECB meeting today. The prevailing market view at present is that the ECB lags behind the Bank of England in terms of monetary easing policy. Although Sterling is likely to continue to trade at low levels internationally as it falls into the trough of the downturn, decisive action from the MPC means we could see recovery in the UK begin earlier than in the Eurozone. There is no data due in the UK today.

US Dollar - US Markets

The Dollar is retaining its current strength, supported by the announcement of President Obama’s $775 billion rescue package and the international flight to quality while market confidence is low.

Retail sales fell 2.7% in December despite the busy Christmas period. This is a decline for the sixth consecutive month and comes amid news that recession is expected to drag on throughout 2009. Negative sales data led to a negative trend in equity markets yesterday. Although economic downturn in the US remains severe, the US is also expected to be the first economy to enter recovery and international risk aversion is supporting the Dollar at present. Oil has risen to $45 a barrel as OPEC has announced further production cuts in the face of reduced demand. Producer Price Indices and the Philly Fed Manufacturing Survey are due out in the US today.

Euro - European Markets

The Euro is back to 0.90 versus the Pound ahead of an interest rate decision from the ECB.

Eurozone industrial production fell by 7.7% in the year to November. This contraction was larger than expected, coming after the 5.7% revision for the year to October and reinforced the view that recession will be severe in the Eurozone. The Standard and Poor’s cut Greece’s credit rating yesterday and official figures show inflation for the 16 member region has fallen to a 26 month low, largely on the back of cheaper energy prices. These figures are adding to the case for an ECB interest rate cut and a 0.5% reduction is expected, taking the base rate to 2%. This will match the lowest rate since the ECB was founded and could be set to fall as low as 1% later in 2009. The decision will be announced at 12:45 GMT and will be followed by a speech from President Trichet.

Other Currencies - Highlights

The Australian and Kiwi Dollars continued to weaken yesterday against the Pound and US Dollar as risk aversion prevailed internationally. The Australian unemployment rate rose 0.1% to 4.5%.

The Japanese Central Bank slashed interest rates to 0.1% yesterday and the Pound slid further towards parity, hitting 1.0464 against the Euro as official figures revealed the extent of government budget deficits in the UK.

Pound Sterling - UK Markets

Despite trading at low levels internationally, the Pound has strengthened overnight to bounce back from another all time low against the Euro. Sitting just above 1.5 this morning against the US Dollar, the Pound is at 1.06 versus the Euro.

Sterling suffered another round of selling yesterday following news that government borrowing had reached record levels. The ONS showed government debt rose to £16 billion in November, £5 billion more than this time last year. The GFK consumer confidence survey released this morning has shown sentiment has improved in recent weeks and a 0.3% rise in retail sales for November support this case. It appears heavy discounting and a reduction in VAT may be working to stimulate consumer spending in the run-up to Christmas although concerns still exist for the new year. Trend-wise, Sterling remains bearish and some analysts claim the widening interest rate differential between the ECB and Bank of England is fuelling the depreciation of Sterling. The reduction of the UK base rate to 2% has inverted the normal rules of the Sterling/Euro relationship and this, combined with negative economic data, is channelling the currencies towards parity. With the prospect of further rate cuts in January almost certain, we are likely to see Sterling remain in very low ranges in early 2009. There is no further data from the UK today.

US Dollar - US Markets

The US Dollar has strengthened overnight against its major currency partners, up 1% against the Euro although it has slid against the Japanese Yen as interest rate cuts have failed to lower the appeal of the Yen internationally.

Yesterday the Federal Reserve slashed rates for overnight lending in a move that was widely expected by markets and designed to improve liquidity in the financial sector. The Philadelphia Fed manufacturing survey showed further contraction in the manufacturing sector, comparable to levels experienced in the 1981-1982 recession. Combined with the news that China has revised growth forecasts to 5% for 2009, this led oil prices to slide, reaching $44 a barrel amid uncertainty over the future of Asian and US growth. There is no data from the US today although GDP and Personal Consumption figures on Tuesday could induce some Dollar volatility.

Euro - European Markets

The Euro has weakened slightly overnight, losing 1% against the US Dollar and Pound but remains trading at the upper limits of its ranges against its major currency partners.

German Producer Price index figures yesterday showed the largest monthly decline since 1949, dropping by 1.5% from October to November. This was larger than predicted by economists and as the Eurozone’s largest economy, proved to be a source of weakness for the Euro yesterday. The Euro is still benefiting from the lack of sharp interest rate reductions by the ECB and severely weak data coming out of the UK and US. There is no major data from the Eurozone today.

Other Currencies

The Japanese Central Bank has slashed interest rates overnight to 0.1%. The Bank reported fiscal conditions had ‘deteriorated sharply’ as the Yen has reached 13 year highs against the Dollar recently, causing problems for Japan’s export based economy. The Bank also revised growth forecasts to 0% for the 2009 financial year. The rate cut has failed to counter the rise of the Yen which continues to strengthen internationally this morning.

The Australian and New Zealand Dollars have slid back from their strong position early in the week as further negative economic data has dampened risk appetite internationally. The Australian Dollar reached 3 month highs against the Pound as expectations of further interest rate cuts continue to mount with Bank of England deputy governor Charles Bean stating UK interest rates could reach zero early next year. There is no data from Australia today and New Zealand’s GDP and consumer confidence figures are due early next week.