Pound Sterling - UK Markets

Sterling is enjoying a bullish run on the US Dollar this morning, sitting in the vicinity of 1.54 after the lows of 1.49 last week. The Pound declined against the Asia-Pacific currencies yesterday and is still slightly down against the Euro.

GDP figures released in the UK this morning show third quarter growth contracting by 0.5%. These figures, in combination with King's comments yesterday are increasing speculation of further aggressive interest rate cuts by the Bank next month. The Treasury this morning is dealing with further criticism of its Pre-Budget Report after the online publication of documents detailing a rise in VAT to 18.5% in 2011. The online version is at odds with the printed version and has sparked a fresh round of criticism of Darling and his ‘secret' plan to increase taxes later. There is no further data from the UK today.

US Dollar - US Markets

The Dollar is losing ground to both the Pound and the Euro at present, despite the announcement of an $800 billion rescue package to stimulate credit and mortgage markets.

Yesterday in the US Consumer Confidence ratings showed a somewhat surprising increase in November, up to 44.9 points from 38 in October. Henry Paulson announced the $800 billion Federal Reserve package, in which the Fed will provide mortgage guarantees and make credit available for small scale consumer loans. The affects of this package are being debated by economists as consumers are being squeezed by devaluing properties and employment uncertainty. A raft of data from the US is due today regarding personal consumption, consumer finance and jobless claims.

Euro - European Markets

The Euro is also strengthening on the US Dollar this morning, ahead of the European Commission plan to be announced later in the day. 

The European Commission is urging its member states to sign an economic recovery plan which combines tax cuts with government spending to prevent a protracted and deep recession in the Eurozone. The ECB has forecast economic contraction throughout 2009, with OECD economists predicting by 0.6%. The recovery plan is expected to cost €130 billion or 1% of GDP. Merkel and Sarkozy have called on European leaders to ease the fiscal rules that require government deficits to remain at a low proportion of GDP.

The German import price index came in at a much lower than expected 2.9 this morning, showing declining cost of imports and therefore falling inflation rates in the Eurozone's largest economy. The French government is also to inject €19 billion into auto and construction industries. There is no major data from the Eurozone today.