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.

The eurozone economy shrank more than previously estimated in the last three months of 2008, figures from Eurostat say. Gross domestic product in the 15-nation area (the figures do not include Slovakia) fell 1.6%, not 1.5% as predicted. The drop is the deepest quarterly fall to date and was brought on by a collapse in external trade.

Pound Sterling - UK Markets

UK consumer confidence fell in March as fears continued about jobs, according to the Nationwide whose confidence index dropped two points to 41. UK unemployment recently hit two million for the first time since 1997. Nationwide said consumer confidence was “broadly stable since the start of the year, but feelings about the current labour market have weakened”. Nationwide’s consumer confidence index has now fallen for nine consecutive months.

US Dollar - US Markets

Dallas Federal Reserve Bank President Richard Fisher has minimised downside risks to the US dollar posed by the US government’s rapidly rising borrowing needs.

In a statement delivered at a forum in Tokyo, Fisher said that problems facing other currencies, such as the euro, were bigger than those facing the United States. As a result, dollar-denominated assets will remain relatively attractive, he said.
Following Fisher’s comments and the Eurostat report, the euro is currently around an interbank rate of 1.308-1.336 against the US dollar this morning, down around 0.6%.

Euro – European Markets

French trade deficit widened in February to EUR4.11 billion from a revised figure of EUR3.71 billion in January – a figure slightly lower than expected – data from the Customs Service showed today. Exports in February fell to EUR28.86 billion from EUR29.29 billion the previous month, while imports also fell to EUR32.97 billion from EUR33.01 billion in January.

The Irish Republic has unveiled its second budget in six months to deal with its rapidly contracting economy. The emergency budget includes a large rise in taxes and a cut in spending, to deal with Ireland’s budget deficit. Finance Minister Brian Lenihan also said an independent agency would take over banks’ bad assets to try and restore lending. His forecast for 2009 was also revised down sharply. He expects it to contract by 8% this year, down from 3% in 2008. Dublin is being forced to deal with a deepening recession while being forced to correct the worst deficit in Europe.

Other Currencies - Highlights

Australia’s Department of Employment and Workplace Relations has said that its leading indicator of employment fell to a negative 0.579 in April from a negative 0.336 in March - the 16th consecutive monthly decline. The indicator measures four weighted time-series variables: ANZ newspaper job ads, Dun & Bradstreet employment expectations, the Westpac-Melbourne Institute leading index of economic activity survey and the Westpac-Melbourne Institute consumer sentiment survey, with the first three of these four contributing to the indicator’s decline in April.

The Australian Bureau of Statistics is due to issue March employment data tomorrow. The jobless rate rose to 5.2% in February, up from 4.8% in January.

Business leaders have warned that UK unemployment will reach 3.2 million in the third quarter of 2010. The British Chambers of Commerce said its survey showed a “worrying deterioration” in manufacturing, with exports reaching 10-year lows. The BCC said one bright spot came in the service sector where the rate of decline appeared to be slowing.

Pound Sterling - UK Markets

UK manufacturing output declined for the 12th straight month in February, while the quarterly measure recorded its steepest drop since records began in 1968, a report from the Office of National Statistics has said.

Although manufacturing output fell 0.9% on the month in February, it compares with a revised 3.0% drop in January and marks the smallest monthly drop since August 2008.

Following the data, the Pound is crawling higher against the US dollar to an interbank rate of between 1.469-1.487, and has risen to an interbank rate against the euro of around 0.9084.

US Dollar - US Markets

The US dollar has risen against the euro and the yen on Monday as American and European stock markets fell lower as recent hopes about economic recovery stalled and investors sought out safe haven currencies. Worries about the financial sector in particular have hit market sentiment hard as banks such as Bank of America, JPMorgan Chase and Fifth Third Bancorp took a series of broker downgrades.

At one point yesterday, the continually weaker Japanese yen dropped to a six-month low against the greenback. The dollar rose to around 101.5 yen before easing back down to around 100 yen.

Euro – European Markets

On an annual basis, retail sales fell by 4% in the eurozone during February, a figure that is 0.6% down from January’s figures. Retail sales have been under pressure from rising European unemployment, which currently stands at 8.5% across the 16-country eurozone.

Other Currencies - Highlights

The Reserve Bank of Australia has cut interest rates to a 49-year low. The cut of a quarter percentage point take interest rates to 3%. Most economists had been predicting no change to rates.

Separately, the Bank of Japan has kept its rates at 0.1%, in line with expectations. However, the Japanese central bank expanded the collateral it will accept in return for loans to commercial banks, now accepting loans on deeds to municipal governments.

A revival in global risk appetite has propelled the South African rand to a near six-month peak against the US dollar. The pair are currently trading around R9.099-R9.139. A surprise contraction in South Africa’s trade deficit and the economy’s resilience in the wake of the global financial crisis have all conspired to boost the rand by around 7% in the past week.

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.

European equities have rallied this morning and the US Dollar has declined as markets regain limited appetite for risk. Sterling however, has been excluded from this rally as it remains battered by weak manufacturing and industrial production figures out this morning. Uncertainty over the stability of the UK banking sector is also putting Sterling under pressure.

Pound Sterling - UK markets

Sterling has been pushed to the lower end of trading ranges this morning amid weak production figures and fears over the stability of the UK banking sector. The Pound is currently trading at 1.38 versus the US Dollar and 1.09 against the Euro and has lost ground against the Australian, Canadian and New Zealand Dollar.

Pressure on Sterling has come from the government announcement it is to increase its stake in Lloyds to 77%, the day after the bank ceded control to the government. The Bank of England is also to embark on its new policy of quantitative easing this week and uncertainty over this method is contributing to market unease. Manufacturing levels have fallen further in January, declining -2.9% on the month and -12.8% on the year. Alistair Darling has called on G20 nations to increase their funding to the IMF, stating rich nations have a ‘moral imperative’ to do more in the wake of the global crisis. An increase in scope for the IMF as global regulators is expected to be high on the agenda at the G20 summit in London in early April. The UK property market remains in a deep slump, confirmed by sales between December and February which are at their lowest level in 31 years. The number of new homes being built is expected to decline to 70,000 this year, nearly half that of previous years. Enquiries from potential buyers however, have been increasing as houses have reached their most affordable level in years and interest rates are at an all time low. There is no further data out in the UK today

US Dollar - US Markets

The Dollar is declining this morning, coming down off recent highs from risk averse investors. The Dollar is down over 1% on the Australian and Kiwi Dollars and has lost ground against the Pound and Euro this morning.

The US Dollar is experiencing enhanced safe haven status at present as the Swiss and Japanese economies are coming under increasing pressure. Yesterday Japan posted the largest budget deficit in 13 years following significant declines in it’s level of exports. The repatriation of US Dollars in times of market unease has led to significant Dollar support of late. Economists predict the US unemployment rate could rise to 9.4% and remain elevated until 2011 as the economy recovers from recession. Not only is the growing unemployment rate a symptom of economic decline, it also inhibits recovery through lowered consumer confidence and unfulfilled economic potential. Ben Bernanke is to speak in the US today.

Euro – European Markets

The Euro has rallied against the US Dollar, Pound and Japanese Yen this morning as markets recover limited appetite for risk. The Euro is currently trading at 0.91 versus the Pound and 1.27 against the US Dollar.

Higher than expected earnings at Daimler AG and the European Aeronautic, Defence & Space Co have boosted European equities this morning and in turn, currency exchange rates. However, lack of policy direction from the ECB is still weighing on the Euro as the economic situation continues to decline. Figures this morning show the German trade balance is at €8.5 billion as export markets continue to contract. German CPI has risen 0.6% for the month of January, taking annual inflation to 1%. There is no further data in the Eurozone today with German factory orders out tomorrow.

Other Currencies - Highlights

The Australian Dollar reached 5 week highs against the Pound last night after the Government announced it was to increase its stake in Lloyds to 77%. The Reserve Bank of New Zealand is set to cut interest rates on Thursday and this could lead to a bout of NZD weakness against the major international currencies. Investor demand for the higher yielding currencies is likely to remain determined by risk appetite while the global financial situation remains volatile.

Japanese markets fell for the third day, pushing the Nikkei index to a 26 year low. Japan continues to be battered by reduced demand for its electronic and manufactured goods combined with the strength of the Yen making these products more expensive. Consumer prices in China have declined for the first time since 2002, dropping 1.6% in February from the previous year and threatening growth in the world’s third largest economy. Japanese GDP figures are due tomorrow.

The Pound is sitting lower this morning against the Euro and US Dollar after RBS has posted the largest loss in corporate history. The bank which is now 68% taxpayer owned lost £24 billion in 2008. In combination with GDP figures which showed the UK economy contracted -1.5% in the fourth quarter, this news damaged the exchange rate value of Sterling, sending it back to the bottom end of ranges against its international currency partners.

Pound Sterling - UK markets

The Pound has lost ground against the US Dollar and Euro overnight, declining to 1.42 and 1.11 respectively after GDP figures revealed a sharp contraction in the fourth quarter of 2008. The Pound is also down against the Swiss Franc and Australian Dollar, but has gained on the Yen and other Asian currency partners.

The Pound declined yesterday as GDP figures revealed a sharp 4th quarter contraction of an unrevised -1.5%. A breakdown of these figures showed a 4.5% decline in industrial production and a 2.3% decline in investment. The only expansion came from Government services which grew by 1.5% and David Blanchflower of the MPC is predicting first quarter GDP to be significantly worse. This morning the Pound has suffered further following news that RBS posted a loss of £24.1 billion in 2008, the largest in corporate history. This was blamed on ‘unprecedented turbulence’ in financial markets and the bank expects further difficulty throughout 2009. After paying the government £6.5 billion worth of preferential shares to take part in the Asset Protection Scheme, the bank is to place £300 billion worth of troubled assets with the UK taxpayer. Nationwide building statistics released this morning show house prices have fallen 1.8% in February, taking the average house price down 17% from a year ago. There is no further data in the UK today.

US Dollar - US Markets

The Dollar is down against the Pound and Euro this morning as weak home sales figures yesterday damaged the Dollar’s safe haven image. The Dollar is also down against the Canadian, Australian and Kiwi Dollars as markets retain a small appetite for risk in the wake of comments from Ben Bernanke and President Obama yesterday.

News that US home sales fell by 5.1% in January capped Dollar gains yesterday. The Federal Reserve expects an upturn in growth to take place in the third quarter of 2009 and despite recent rallies, this news is muting the tone in UK and European equities, as growth here is expected to follow the US by approximately three months. A raft of US data is out today from jobless claims to durable goods orders and market sentiment is likely to be the primary determinant of currency exchange rates.

Euro – European Markets

The Euro is up against the US Dollar this morning, trading at 1.27 and the Euro-Pound exchange rate is currently 0.89. The Euro has also strengthened on the Yen and it’s other Asian currency partners.

European equities remain positive this morning following Ben Bernanke’s announcement that the Federal Reserve would not be looking to nationalise major American banks. UBS shares rose yesterday after Switzerland’s biggest bank hired the former CEO of Credit Suisse to restore market confidence. The news was interpreted positively by markets and Europe’s Dow Jones climbed 1.9%. The German unemployment rate has risen to 7.9% as a further 40 000 people were made jobless in February as recession deepens in the Eurozone’s largest economy. Today markets will be interested in consumer, industrial and economic confidence figures to be released in the Eurozone.

Other Currencies - Highlights

The Yen fell to a three month low against the US Dollar and weakened against the Euro overnight after figures yesterday revealed a 46% drop in exports. The Yen is heading for its worst month against the Dollar in 13 years and faces threats to its status as an international safe haven as the country is hit increasingly hard by the global recession. A series of significant data is released in Japan today, including industrial production, consumer price index and retail trade figures.

The Euro has suffered its biggest weekly decline against the US Dollar in a month – and the seventh weekly loss out of eight – amid speculation that European Central Bank President Jean-Claude Trichet will today signal that he may cut interest rates to spur growth. The 16-nation currency is currently hovering just over 1.26 against the US Dollar.

Pound Sterling - UK markets

According to the Council of Mortgage Lenders, the number of homes that were repossessed in the UK declined slightly in the fourth quarter. A total of 10,400 homes were taken into possession between October and the end of the year, down from 11,100 between July and September.

However, a report released by the Office for National Statistics showed a surprising lift in UK retail sales in January. The rise is being attributed to the numerous price cuts that UK retailers made during the previous month. Despite the closure of numerous stores, such as Zavvi and Woolworths, retail sales have climbed 0.7% after increasing 1.7% in December. Economists had predicted a 0.1% drop.

US Dollar - US Markets

The Dollar has declined over 1% against the Euro this morning as fears abate over European exposure to bad debts and the US stimulus packages revives appetite for risk. The Dollar is also down over 1% on the Australian and Kiwi Dollars and is down to 0.69 against the Pound.

Yesterday’s figures in the US revealed housing starts and new building permits dropped to record lows in January along with industrial production figures which contracted 1.8% for the month. This signals a weak start to 2009 after the US economy contracted 3.8% in the final quarter of 2008. President Obama released details of a $275 billion housing package which is an attempt to address the root of the financial crisis and prevent the rising number of foreclosures on American homes. An estimated 400,000 home owners lost their homes in the US last year. This comes in the same week as the $787 billion rescue package, yet market response remains uncertain as details and growth prospects are unclear. The Federal Reserve have also announced they expect unemployment to rise to over 8.5% and projected long-term interest rates at 2%. The FOMC minutes are released today along with the Philadelphia Fed and jobless claims figures.

Euro – European Markets

French consumer prices fell in January for the seventh month in a row, but by less than expected, as prices for energy slumped and those of manufactured products remained unchanged. The French CPI report dropped 0.4% on the month, cutting the yearly increase to 0.7%, French national statistics bureau Insee said.

However, other key gauges of euro zone services and manufacturing activity unexpectedly crashed to new lows in February, suggesting that economic contraction in the first quarter of this year may be even worse than the final months of 2008.

Data released by Markit today has shown that the Purchasing Managers Index for the dominant service sector slumped to an 11-year survey low of 38.9 in February, confounding expectations that we would see a rise from 42.2 to 42.4. The data also showed price pressures sinking to survey record lows and is sure to strengthen expectations that the ECB will be forced to cut interest rates when it meets again in March.

Factories in the euro zone fared little better, with the manufacturing PMI also coming in at a record low of 33.6, considerably below the 50.0 mark that divides growth from contraction and, indeed, the 34.4 level seen January. The fall in both sectors took the combined composite index down to a record low of 36.2 from January’s 38.3 and well below the 38.5 forecast. The suggestion is that the 1.5% contraction in the economy in the final quarter of 2008 may be even worse in January-March.

Other Currencies - Highlights

The South Korean Won nosedived to a three-month low against the US Dollar this morning, breaking the 1,500 mark for the first time since November 2008 and closing yesterday at 1,506 Won against the US Dollar. Analysts predict that the Won will stay on this downward slump for the time being at least.

The Eurozone economy contracted -1.5% in the fourth quarter of 2008, dragging annual growth down to -1.2%. US retail sales figures yesterday showed an unexpected increase by 1% in January, providing a slight boost in risk appetite and allowing the Pound to recover some of the losses made earlier in the week.

Pound Sterling - UK markets

The Pound is gaining on the US Dollar this morning, trading at 1.45 and has gained over 2% on the Yen as a degree of risk appetite has returned with the announcement of better than expected retail sales figures in the US. The Pound has also gained 1.4% on the Euro this morning, trading at 1.12 and is stronger against its Asian and Australasian currency partners.

Positive retail sales figures in the US provided a boost to risk appetite overnight which saw Sterling recover some of the ground lost yesterday. Gloomy industrial production statistics for the Eurozone and an absence of UK data have also helped the Pound to strengthen. This morning Virgin Atlantic has announced 600 job cuts which amounts to 7% of its workforce as recession is affecting long haul travel figures. The recession has also hit the football industry with Chelsea posting a £65.7 million loss in the year to June 2008. Today is light for UK data with consumer and retail price indices due early next week.

US Dollar - US Markets

The Dollar has declined overnight as a degree of risk appetite returns to markets. Sliding 1.6% against the Pound and 0.3% against the Euro, the Dollar is also weaker against its major European and Australasian currency partners.

US retail sales figures released yesterday showed a 1% increase in January, breaking a slide of 6 consecutive months. This gains back one third of the retail spending drop in December and provided a slight boost to equities in an otherwise unremarkable week. The retail sales figures also fuelled optimism that interest rate reductions and monetary easing policy are starting to impact on the wider economy. The price of oil remains in the region of $45 a barrel as unease continues over when the turning point for recovery will be. There is no major data out in the US today.

Euro – European Markets

The Euro is up this morning, recovering from two week lows against the Dollar to trade at 1.29 and is down nearly 1.3% on the Pound to 0.89. The Euro has also gained on the Swiss Franc, Yen and most of its European currency partners.

GDP figures for the Eurozone this morning show the economy has contracted -1.5% in the final quarter of 2008 taking year on year GDP down by -1.2%. The German economy, the Eurozone’s largest, has also contracted by -2.1% in the fourth quarter of 2008, dragging year on year growth down to -1.6%, the worst performance since 1990. Industrial production figures for the Eurozone yesterday showed a -2.6% decline in December, taking annual levels to -12%. This contraction is deeper than UK figures and could be a source of Euro weakness to come. There is no further data from the Eurozone today.

Other Currencies - Highlights

The Australian and Kiwi Dollars remain volatile, subject to macro-economic trends and pressured by increasingly negative economic data. The Australian Senate has passed the AUD42 billion rescue package which was held up in a tied vote yesterday, after reaching a political compromise. The plan includes provision for greater public works spending and is equivalent to 1.3% of Australian GDP. In New Zealand retail spending has declined for the fourth consecutive month and home sales have slumped to their lowest level in 20 years.

Egypt has lowered interest rates for the first time since 2006 as slumping commodity prices have led to easing inflation. The Central Bank reduced the base rate yesterday by 100 basis points to 10.5%. Recession will affect many developing nations through a decline in tourism, trade and remittance income. The Canadian Dollar is faring well as investors seek out the safety of gold as an asset. Figures regarding foreign investment in Canadian securities are due on Monday.

Global equities have continued to gain ground this morning, fuelled by optimism surrounding the pending announcement of the Federal Reserve rescue package. This is despite further negative economic data from the UK and Eurozone and the package is expected to support risk appetite internationally.

Pound Sterling - UK markets

This morning the Pound is up to 1.48 against the US Dollar and 1.14 versus the Euro. Sterling is also enjoying bullish runs against its major currency partners as the pending approval of the Federal Reserve Rescue package is stimulating risk appetite internationally.

The release of industrial production statistics late last week led Sterling to weaken against the Dollar and Euro, although this ground has been recovered this morning along with an increase in risk appetite. Industrial production fell by 1.7% in December while manufacturing production fell by 2.2%. These figures were some of the lowest seen since 1981 and reflected an annual decline of approximately 10% in both sectors. Combined with contractions in the service sector, this shows the UK economy well into recession territory and the unemployment rate will continue to rise throughout 2009. The Bank of England’s Quarterly Inflation Report is due today followed by trade balance figures, the UK unemployment rate and retail sales indicators later in the week.

US Dollar - US Markets

Results are mixed for the US Dollar this morning against its international currency partners. The Dollar is currently trading at 0.67 versus the Pound, 0.77 versus the Euro and is down against the Yen.

Bleak US job data in the US on Friday renewed fresh hopes that the Federal Reserve Rescue Package will be quickly approved. In January 598,000 jobs were lost, the sharpest decline in 34 years and the US unemployment rate has risen to 7.6%, up 0.4% from the previous month. The announcement of a package could do much to stimulate risk appetite internationally, providing strength for some of the higher yielding currencies. President Obama is expected to urge speedy approval today as the package is seen as necessary for global market confidence. The current deadline is 16 February. There is no data from the US today with retail sales and trade balance figures due later in the week.

Euro – European Markets

The Euro is declining against the Dollar and Pound this morning, currently trading at 1.29 versus and 0.87 respectively as business sentiment has declined throughout the region.

Business sentiment among the 16 member Eurozone has slumped in February, falling to 36.1 on the Sentix Index from 34.4 in January. This is an all time low and a reflection of the declining economic situation in the Eurozone. The Euro has also declined for 2 consecutive weeks against the Pound as market perception remains that the ECB has been foot dragging when it comes to fiscal policy. The Russian Central Bank has raised the overnight repo rate to 12% in a bid to prevent the currencies collapse as speculators are driving the Ruble downwards. The Ruble has slumped 35% against the Dollar since August. Today is light for Eurozone data with the ECB monthly report due on Thursday and GDP figures on Friday.

Other Currencies - Highlights

Japan continues to be battered by reduced export demand and strong value of the Yen and car maker Nissan has announced 20 000 job cuts as a result of the credit crunch. Nissan’s announcement comes after electronics giant Panasonic announced 15 000 redundancies and Toyota trebled its losses to 450 billion yen last week.

The Australian and New Zealand Dollars have made gains over the weekend on the back of improved risk appetite. Gains in equity markets have fuelled surges in the higher yielding currencies and the announcement of early details of the Federal Reserves $900 billion package could provide a source of strength for the higher yielding currencies.

The National Institute of Social and Economic Research (NISER) have predicted a 2.7% contraction for the UK economy in 2009 as the world experiences its worst recession in 60 years. President Obama has responded to criticism of protectionism by reiterating that ‘world trade’ remains a priority in the current financial environment.

Pound Sterling - UK markets

The Pound is stronger against the US Dollar this morning, up to 1.44 and remains in the vicinity of 1.10 versus the Euro. Against the Australasian currencies Sterling is also bullish as negative economic data from the world’s major economies is depressing exchange rates in the trade based economies.

This morning the National Institute of Social and Economic Research (NISER) have predicted the UK economy will contract by 2.7% in 2009. This decline will be fuelled by an expected 3.8% drop in consumer spending and an 8.8% decline in business investment as Britain suffers the worst recession in 60 years. UK consumer confidence has also weakened in line with expectations. The Bank of England has provided £185 billion of taxpayer money to banks in the Special Liquidity Scheme and the MPC has undertaken significant monetary easing already. The Bank is set to reduce interest rates to 1% when it meets on Thursday with some economists predicting they could move to zero. There is no major data in the UK today.

US Dollar - US Markets

The Dollar is strengthening this morning, up against the Euro, Pound and its major European currency partners. The Dollar is currently trading at 0.69 versus the Pound and 0.77 versus the Euro.

President Obama has responded to criticism of his ‘Buy America’ clause, commenting that he wants to avoid a ‘trade war’ at a time when global trade is necessary to financial recovery. The Federal Reserve stimulus package is to promote US manufacturing industries and has come under fire from the EU as a thinly veiled form of protectionism. President Obama has also announced a $500,000 cap on corporate bonuses after banks have asked for taxpayer bail outs. The Federal Reserve stimulus package is currently seeking approval in the Senate and US mortgage application figures are out today.

Euro – European Markets

The Euro is lower against the US Dollar ahead of the ECB interest rate decision and is trading at 0.90 against the Pound.

Unemployment has risen rapidly in Spain, by 199,000 people or 6% in January. The current unemployment rate is 14.4%, significantly higher than other European Union members as property and construction have been particularly hard hit by the recession. The EMU Purchasing Manager Index for Services in January has come in at 42.2 showing a contraction slightly less than expected but still deep in recession territory. Expectations are mixed regarding the ECB rate decision. At the last meeting Trichet indicated that further rate reductions would not be made until March. However, accelerating downturn in the Eurozone may spur the ECB into action. Retail sales figures are due this morning.

Other Currencies - Highlights

The Australian government stimulus package has been regarded with optimism by markets and the Aussie Dollar clawed back ground against the US Dollar and Pound yesterday. This morning the Australasian currencies are weaker with a minor return to risk aversion leading the Pound to strengthen back over the Aussie and Kiwi Dollars. Australian retail sales figures and the New Zealand unemployment rate are out today.

Panasonic, Japan’s largest electronics company is to cut 15,000 jobs as global recession and the stronger Yen have forced the company into its weakest performance in seven years. Mazda and Mitsubishi have both suffered significant losses as contraction in their major export markets lead to lower purchases of big ticket items. There is no data out in Japan today.