Sterling Gains as Stocks Plummet
Pound Sterling - UK Markets
Sterling gained against the US Dollar and Euro and is up against most of its major currency partners, supported by better than expected retail figures and the weight of negative sentiment surrounding the US economy at present.
ONS figures released yesterday showed UK retail sales down by 0.1% for October. This follows a 0.5% fall in September and is much better than the predicted 0.9% decline. ONS figures also showed government borrowing has reached £37 billion, nearly double that of this time last year. The government is attempting to dampen speculation of tax cuts ahead of it pre-budget report as this could shock markets and be viewed as fiscally irresponsible. There is no major data released in the UK today and all eyes will be on the pre-budget report due on Monday.
US Dollar - US Markets
The Dollar weakened overnight and Wall Street took a severe battering, reaching its lowest level in 10 years amidst widespread job losses in financial and manufacturing sectors.
In the US unemployment is currently running at 6.5% and jobless claims have risen to 542 000, from 515 000 the previous week. Large scale layoffs from banking giants Goldman Sachs and Citigroup, as well as throughout the manufacturing and construction sector are fuelling the unemployment rise. The Philly Fed Survey showed a worse than expected -39.3 reading, indicating negative prospects for the US manufacturing industry. Combined with the grim outlook for auto manufacturers, US job losses may rise much higher into 2009. Oil fell $3 to below $50 a barrel and the S&P 500 declined 6.7% to a 10 year low. There is no data from the US out today with house pricing statistics due on Monday.
Euro - European Markets
The Euro is up more than one percent against the US Dollar, although declined against the Pound overnight.
The German PMI for manufacturing came in at a bearish 36.7 this morning, lower than the estimated 42.0, showing bleak economic conditions for the Eurozone's largest economy. PMI's in manufacturing and services are due for the EMU later in the day.
The Bank of Japan's interest rate decision is due this morning with a press conference to follow. Base interest rates in Japan currently sit at 0.3%.