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.

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.