Dollar Strengthens with Citigroup Rescue
Pound Sterling - UK Markets
Sterling is down slightly against the US Dollar and the Euro, still hovering in the low $1.49 region ahead of Darling's Pre-Budget Report this morning.
Although many aspects of the report are contained in today's media reports, the tone and details will be significant for the value of Sterling. Detailing government spending throughout 2009/2010, the Report is expected to reveal a 45% tax rate for those earning over £150 000 a year and VAT being reduced from 17.5% to 15% in a move designed to get the public spending again.
UK growth data due later in the week is expected to confirm the UK in one of the worst positions of the G7 nations. Economic growth is expected to stay negative until the second quarter of 2009, when fiscal stimulus measures made by the government should make themselves apparent in the economy. Government borrowing continues to worry investors as the figure is expected to top £120 billion next year and further cuts to the base interest rate are expected at next months MPC meeting. The Pre-Budget Report is presented at 3:30 today.
US Dollar - US Markets
The US Dollar has strengthened this morning along with equity markets on the news that Citigroup is to receive $20 billion of the $700 billion Federal Reserve rescue package.
The Treasury is to provide $306 billion worth of guaranteed loans and $20 billion worth of government cash for preferential shares in the banking giant which operated in over 100 countries. The move comes after Citigroup shares plunged more than 60% last week as 52 000 job cuts were announced, in addition to the previous 23 000. Today in the US market focus is likely to be on more detailed aspects of the plan. Existing home sales figures are also released and Barack Obama is due to give a speech later in the day.
Euro - European Markets
The Euro is down against the US Dollar but up against the Pound this morning with European stocks advancing on news of the Citigroup bail out.
Deutsche Bank and Credit Suisse shares have each gained more than 3% this morning following news of the bail out from the US Treasury. German GDP figures are due tomorrow and as the largest economy in the Eurozone, are likely to provide a strong indication of the economic state of the continent. Economists are predicting a further 0.5% interest rate cut at the ECB meeting on December 4. Saudi Arabia and Israel have recently reduced their respective base interest rates as downturn sweeps through the global economy. Industrial new orders figures for the EMU are released later in an otherwise light day for data from the Eurozone.