The euro is sitting at a 5 week low against the US dollar this morning as the single currency continues to be plagued by uncertainty surrounding ECB strategy. Larger than expected credit write downs at Bank of America yesterday reignited fears that the worst is not over in the financial crisis putting an end to the recent 6 week rally in global equities.

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.

The CBI has predicted the UK economy will contract by 3.9% in 2009, more than twice the amount predicted by Alistair Darling late last year. The euro has reached a one month low against the dollar amid concerns that the ECB is not doing enough to safeguard the ailing eurozone economy and US leading indicators released today are expected to show signs of recession easing in the US.

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.

Better than expected jobless data in the US yesterday bolstered investor hopes of a tentative stability in the world’s largest economy. While economic data continues to be mixed, there is growing evidence the rate of decline is slowing in the US and to a lesser extent, the UK. This morning sterling has fallen from its 3 month high versus the US dollar but continues to gain against the euro.

Pound Sterling - UK Markets

The pound declined against the US dollar yesterday as better than expected jobless data in the US boosted hopes of a tentative recovery. This fuelled demand for the dollar at the expense of the pound and euro. Sterling has fallen away from 3 month highs against the dollar to trade in the region of 1.48 this morning but continues to gain on the euro, trading at the interbank rate of 1.13 early this morning.

David Miles, chief economist at Morgan Stanley in the UK has added to the positive chorus, noting that recession may ease as quantitative easing and other government initiatives begin to trickle down to the wider economy. Miles is set to replace David Blanchflower on the MPC in June. However, several large question marks remain over the UK economy and sterling exchange rates remain subject to international appetite for risk. The Council of Mortgage Lenders has cited negative equity as a factor in the low property market turnover and sentiment towards sterling is likely to remain muted in the lead up to next weeks budget. There is no data out in the UK today.

US Dollar - US Markets

The US dollar strengthened broadly overnight as better than expected jobless data boosted hopes that the pace of recession may be easing. The Philly Fed manufacturing survey also showed the rate of decline is slowing although both housing starts and new building permits continued to fall on their way to record levels in March.

This news provided fuel for a dollar rally against its international currency partners as it boosted hopes we are beginning to see the ‘green shoots’ of recovery in the US. This morning search engine Google has announced strong profits for the first quarter of 2009, rising to USD 1.42 billion which is significantly better than expected given the downturn in advertising spending as a result of recession. JP Morgan announced better than expected profits yesterday, sending the FTSE 100 to close 2% higher and Citigroup is to release company earnings later in the day. This, combined with a speech by Ben Bernanke could have a positive impact on Wall Street and international markets.

Euro – European Markets
The euro is broadly weaker this morning following Trichet’s comments that the ECB must do everything possible to restore corporate confidence, increasing speculation of further rate cuts and quantitative easing in the Eurozone. The euro continues to decline against the pound but has found support at the 1.3 level versus the US dollar.

This morning Sony Ericsson has announced 2,000 job cuts in an attempt to save EUR400 million after an extremely difficult first quarter. This follows Nokia’s announcement yesterday of a 90% profit fall in the first quarter of 2009 and both companies expect to face challenging markets throughout 2009. The EMU trade balance is released this morning with the producer price index for Germany due early next week.

Other Currencies - Highlights

News that China’s growth rate has fallen to 6.1% prompted a return to safe haven currencies and this sent the Australian and New Zealand dollars lower against their international currency partners overnight. The Aussie and Kiwi dollars both sunk to 2 month lows against the Japanese yen. Australian growth and budget forecasts due in May are now expected to be significantly worse than predicted and New Zealand inflation rates have fallen to 3% as consumer demand wanes in the midst of global recession. This is prompting speculation that the RBNZ may leave interest rates unchanged again this month. The Australian import and export price indices are out this morning.

Switzerland’s biggest bank, UBS, has said it will seek to cut costs by shedding 8,700 jobs by 2010. The news came as the bank announced it had lost about 2bn Swiss francs in the first three months of 2009. UBS has been one of the biggest banks hit by exposure to the sub-prime loans crisis in the US and ensuing turmoil. The Swiss bank is also being probed by the US authorities over alleged fraud and tax evasion involving US citizens.

Pound Sterling - UK Markets

Interest from home-buyers is starting to gain “real momentum”, although sales remain low, the Royal Institution of Chartered Surveyors has said. While new enquiries in the housing market increased for the fifth consecutive month, surveyors are still selling fewer than 10 homes on average each over the last three months. Nonetheless, there the poll found increased optimism that sales would pick up during the year, but it remained tough for first-time buyers.

With little fresh news from elsewhere following the Easter holiday, currency markets have been taking their cue from equities. With London FTSE index falling 0.3 percent in early trade, the pound has fallen against the US dollar this morning with investors once again returning to the perceived safety of the US currency. The pound will currently buy between 1.4804-1.4908USD.

US Dollar - US Markets

Retail sales in the US unexpectedly fell last month as rising unemployment forced consumers to ease back. In a report released yesterday, the Commerce Department said that the US retail had seen a 1.1% decrease in March. Car dealers, electronics stores and restaurants led the decline.

However, with Federal Reserve Chairman Ben Bernanke echoing Barack Obama’s comments by stating that the “sharp decline” in the US economy is slowing, the dollar has been enlivened by safe haven flows against the pound and the euro. While there is still unease ahead of earnings from the likes of Citigroup and JP Morgan Chase, the euro fell around 0.6% against the greenback and is now currently trading at an interbank rate of between 1.3265-1.3286USD.

Euro – European Markets

Following the release of the German March wholesale price index report, the euro showed mixed trading against its major counterparts. While the euro eased against the dollar and the franc, it gained slightly against the pound.

The euro is currently worth around 0.8907-0.8912 against the pound.

Other Currencies - Highlights

China’s economy is showing some signs of recovery from the global financial crisis, the country’s Prime Minister Wen Jiabao has said. China has already implemented a 4tn yuan stimulus package to boost economic activity. Despite its problems, China’s economy - the third biggest in the world - is forecast to grow by at least 5% this year, in stark contrast to many major global economies that are shrinking.

Poland’s government is to ask the International Monetary Fund for a USD20bn credit injection to help tackle the economic crisis. Finance Minister Jacek Rostowski said it would increase bank reserves and make Poland “immune to the virus of the crisis and speculative attacks”. Rostowski said the move would increase state bank reserves by about a third.

The government’s much-criticised cut in VAT is working and has led to a big boost in consumer spending, according to The Centre for Economics and Business Research. CEBR says that the cut, which took effect on 1 December 2008, has led to £2.1bn of extra sales. The centre says the growth in retail spending is “remarkable” and argues that the temporary cut of 2.5%, which is due to expires in January 2010, should be extended for a further six months.

Pound Sterling - UK Markets

With the UK celebrating Easter over an extended four-day weekend, market news is a little light on the ground today. However the pound has this morning hit a 4-day interbank high of between 0.8863-0.8963 against the euro. Citing trading patterns, analysts from BNP Paribas SA are anticipating the euro declining to a six-week low of around 88.50 later this week.

US Dollar - US Markets

A day after Barack Obama said that he sees “glimmers of hope” in the US economy, Goldman Sachs has reported a net quarterly profit of USD1.8bn, beating analyst expectations. The previous quarter had seen the firm post its first quarterly loss since going public in 1999. Some analysts say the earnings results could suggest the worst could be over for finance firms.

The announcement from Goldman Sachs follows a statement from Wells Fargo that said the bank expected a record net profit for the quarter. Citigroup Inc. and JP Morgan Chase & Co. are both due to report earnings this week.

Following the announcement, the euro is down slightly against the US dollar with investors seeing the announcement as a strong sign that the US economy is on the up. The 16-nation currency will currently buy USD around 1.3282-1.3353 at an interbank rate.

Euro – European Markets

The German government announced over the weekend that they will decide on 21st April whether to set up a “bad bank” to take on banks’ liquid toxic assets, allowing them to return to their core business. The issue has been under discussion for several weeks and received another impetus last month after the US administration unveiled its Public-Private Investment Program, aimed at helping banks to sell troubled assets to public-private partnerships.

According to the Monster Employment Index, unemployment in the European Union looks set to rise further in March as companies continue to trim costs and employment opportunities recede. The Index slid three points to 112 in March after a surprise increase in February. Monster said the steepest declines in online recruitment opportunities were in the marketing, public relations and media, environment, engineering and auto sectors.

Other Currencies - Highlights

Singapore’s economy shrank by 19.7% in the first quarter of 2009 compared with the previous three months, its biggest quarterly contraction on record.  The government now expects the country’s GDP to contract by between 6% and 9% this year, much more than the previous estimate of between 2% and 5%. The country’s Ministry of Trade and Industry said the economy’s performance was much worse than expected.

World leaders yesterday agreed on a $1.1 trillion injection of financial aid into the global economy, with Gordon Brown claiming that the grand bargain he had brokered represented “a coming together of the world” which would speed recovery from the worst recession since 1945. The deal contains tougher-than-expected measures to tighten financial regulation, including a clampdown on tax havens.

Pound Sterling - UK Markets

Sterling jumped to a seven-week high against the US dollar today after UK service sector data posted a higher-than-expected reading. The PMI Services activity index rose to 45.5 in March from 43.2, the highest reading since September, and beating economists’ forecasts of 43.5. The surprise increase caps a good week for UK economic data with PMI Manufacturing and PMI Construction releases improving as well.

The pound has since risen against the US dollar to between 1.4498-1.4898, the highest figure since late November. The euro is now down around 0.4 percent against the pound at a figure around 90.91-90.95 pence.

However, UK house prices fell by 1.9% in March compared with the previous month, according to the Halifax. The average UK home now costs £157,226, at least £30,000 less than a year ago. When comparing the average price from March compared with March 2008, the drop was 17.6%. The reported month-on-month change comes in contrast to the “surprise bounce” of 0.9% in March reported yesterday by the Nationwide Building Society.

US Dollar - US Markets

With investors’ risk appetite boosted by the outcome of the G20 meeting, the US dollar rose briefly above 100 yen in Asian trading on Friday, the first time it had done so since early November 2008. Caution has since returned to the market, ahead of US employment figures due later in the day, which are expected to show the US economy continued to lose jobs in March. Economists estimate that the US economy lost 656,000 jobs in March.

Euro – European Markets

More dire news from Spain as the fall in industrial production continued to gain pace in February, pointing to a deepening slump for the eurozone’s fourth-largest economy. According to preliminary data from Spain’s National Statistics Institute, Spanish February industrial production fell 22% in calendar-adjusted terms, following a 21% decline in January and 20% fall in December.

Other Currencies - Highlights

China’s manufacturing sector showed some growth in March for the first time in six months. The purchasing managers index from the China Federation of Logistics and Purchasing rose to 52.4 from February’s figure of 49. Any figure above 50 indicates an expansion in the manufacturing sector. With manufacturing accounting for about 40% of China’s economy, it has been hit by falling demand from its customers in recession-hit western economies.

According to the Federal Statistics Office of Switzerland, Swiss consumer prices fell for the first time in five years in March, dropping by the biggest annual amount in almost 50 years, as the central bank said it would fight deflationary threats. The drops were bigger than forecast and followed unexpected monthly and yearly rises of 0.2 percent in February. Following the report, the franc has fallen against its major counterparts. The Swiss currency is currently trading between 1.5274-1.5474 against the euro, around 1.115-1.1370 against the US dollar and between 1.6482-1.6882 against the pound, an 18-day low.

US President Barack Obama has arrived at Downing Street for a meeting with Prime Minister Gordon Brown ahead of the G20 summit. World leaders are gathering in London to discuss ways to resolve the worst financial crisis since the 1930s.

However, rifts have already begun to emerge, with France threatening to walk away from talks if its demands for stricter financial regulation are not met. The summit takes place amid tight security, with the police warning of “unprecedented” levels of protest.

Pound Sterling - UK Markets

According to the latest Experian Footfall UK National Index, consumers continued to desert the High Street in March, with shopper numbers falling by 1.7% across the UK. Wales and the South West were the worst hit regions, with shopper numbers down 7.13%. Only the North East, South East and East Midlands recorded a rise.

The UK purchasing managers index for the manufacturing sector improved significantly in March from a record low in February, data from economics research group Markit Economics has shown.

The manufacturing PMI lifted to 39.1 in March from 34.9 in February. Analysts had been expecting a marginal rise to 35.0. While the figure is still historically low, it suggests belief that a recovery by early 2010 is possible.

Meanwhile, Chancellor Alistair Darling has gone back on plans to increase business rates by 5% from 1 April. Mr Darling said the rise was linked to the Retail Prices Index last year, but RPI inflation had now fallen to zero. The Chancellor said businesses would face only a 2% rise this year and the remaining 3% would be smoothed out over the following two years.

US Dollar - US Markets

US house prices fell by a record 19% in January compared with a year earlier, according to a closely-watched index. The Standard & Poor’s/Case-Shiller Home Price index records prices in 20 of the largest cities in the US.

The index also showed a month-on-month fall as prices fell 2.8% in January compared with December. Earlier this month, figures showed home construction in February rose by a quarter year-on-year, raising hopes the US housing market may be bottoming out.

Euro – European Markets

Retail sales in Germany unexpectedly fell 0.2% on the month in February from January, according to seasonally adjusted figures released by the Federal Statistics Office. The data is yet another signal that household demand in Europe’s largest economy remains depressed, leaving little hopes for a recovery in the near future.

Further bad news from Spain, as car registrations fell 39% on the year in March, Spanish car manufacturers’ association Anfac has said. In a release, Anfac said 76,503 cars were registered in March, down from 124,702 a year earlier. Car registrations fell by 49% on the year in February and by 42% in January. Not even rapidly decelerating consumer price inflation and falling mortgage payments as a result of European Central Bank rate cuts have been able to stimulate Spanish consumption.

Other Currencies - Highlights

Business confidence among major manufacturers in Japan is at a record low, according to a wide-ranging survey by the Japanese central bank. The quarterly Tankan survey of more than 10,000 companies is closely watched in Japan as a key indicator of the health of the country’s economy. Results released by the Bank of Japan show that business confidence among major manufacturers tumbled dramatically, hitting the lowest level ever recorded.

Elsewhere, business confidence in Poland’s industrial sector held up better than expected in March but remained in sharply negative territory, as new orders remained near record lows while job shedding continued. A survey of 300 industrial companies prepared by Markit showed Polish manufacturing PMI rose to 42.2 in March, from 40.8 in February - its third straight monthly increase and considerably better than the 40.9 figure that had been forecast.

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

Pound Sterling - UK Markets

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

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

US Dollar - US Markets

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

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

Euro – European Markets

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

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

Other Currencies - Highlights

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

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

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

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

Pound Sterling - UK Markets

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

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

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

US Dollar - US Markets

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

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

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

Euro – European Markets

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

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

Other Currencies - Highlights

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

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

The International Monetary Fund has predicted that the recession will last longer in the UK than in any of the world’s other major economies.

The IMF has warned that the UK will be the only member of the G7 group of leading industrial countries that will continue to see its economy shrink in 2010. The IMF said the UK economy will shrink 3.8% this year and 0.2% in 2010. By contrast, IMF predictions see the G7 nations will see their economies decline 3.2% on average in 2009, before growing 0.2% next year.

Pound Sterling - UK Markets

Official figures due out later today are expected to show that the number of people in the UK who are unemployed has risen to more than two million for the first time since 1997. Analysts predict that the data for November to January will show that the number of people out of work rose by more than 150,000 during the period. The TUC had claimed earlier this week that there are now 10 jobseekers for every vacancy advertised in UK jobcentres.

The thirteenth consecutive monthly increase in claims was significantly larger than the market consensus estimate for a rise of 87,500 in a Dow Jones Newswires survey of economists last week. Other data released by the Office for National Statistics showed that the number of job vacancies slumped to its lowest level since comparable records began in 2001, while the number of redundancies soared to its highest level since that series started in 1995.

Proposals aimed at overhauling the rules governing UK banking and stopping a repeat of the financial crisis are to be unveiled by the City watchdog. Financial Services Authority chairman Lord Turner will put forward new rules on lending and seek to restrict the ability of banks to take excessive risks. The plans will aim to stop banks lending too much during boom times, which may include limits on home loans. Lord Turner will also recommend that banks publish more and clearer information in their accounts about the risks they are running. A proposal to form a new pan-European body will also be mooted, to set standards for other regulators to follow.

US Dollar - US Markets

Federal Reserve policy makes are set to debate today what to do about the deepening US recession. Officials will determine how to provide further stimulus to the economy, from purchasing more mortgage bonds to buying Treasury securities. They’ll also keep the benchmark interest rate as low as zero percent, according to all 71 forecasters in a Bloomberg News survey.

At least three of the top Fed officials want to buy Treasuries or target the supply of money, while Chairman Ben Bernanke has favoured reviving specific credit markets. The Federal Reserve aren’t alone in mulling this problem; central banks worldwide are grappling with how to set policy when rates are near zero; the Bank of England started buying government debt this month, and the Bank of Japan said today it would increase its purchases of sovereign bonds.

Elsewhere, data released late on Tuesday showed unexpected strength in the housing market, with a 22.2 percent surge in U.S. housing starts in February. These figures eased fears about the worst-case scenario of another deflationary depression.

Euro – European Markets

European stocks have opened firmer today, as renewed confidence and positive sentiment outweighs the dismal global economic backdrop hanging over the markets. The Euro its highest level in over six weeks against the Pound, with investors trying to position themselves following the UK jobs data, as well as minutes from the Bank of England’s last policy meeting.

Buoyed by improved investor confidence after surprisingly upbeat German data, the Euro has been holding close to a one-month high against the US Dollar.

Other Currencies - Highlights

Retail sales in Switzerland increased 1.2% in January after rising at an annual pace of 3.6% in the previous month. Ahead of the release, the Swiss Franc ticked down against the Euro and the US Dollar, but advanced against its other major counterparts.

The breakdown of the report showed that demands for electronic goods rose 9.8%, while sales of healthcare products increased 6.5%. However, discretionary spending on personal goods plunged another 12.1% after falling 20.0% in the previous month, and was followed by an 8.1% drop in cultural goods.