Caution Reigns for Markets
Pound Sterling - UK Markets
The Pound declined significantly against the US Dollar and the Euro overnight, hampered by uncertainty over the size of the base rate cut to be made by the MPC on Thursday. While 0.5% is considered likely, there are substantial voices expecting a 0.75-1% cut and Sterling is over 3% lower against the Dollar and the Euro this morning.
Pressure for Sterling began yesterday afternoon when Eurozone leaders claimed recession in the UK would be deeper and longer lasting than for the European economies. UK Purchasing Manager Index for Manufacturing was released, and while still significantly negative, is an improvement on the August figures, showing a recovery in the domestic manufacturing sector.
Nationwide Consumer Confidence data and a GDP estimate for quarter 4 is due in the UK tomorrow.
US Dollar - US Markets
US Dollar was steady overnight, though largely due to the uncertainty affecting Euro and Sterling and caution prevails in the US as the nation awaits results from the polls.
A 26 year low in the US PMI for Manufacturing once again stirred up recession angst and Brent Crude fell away to the vicinity of $60 a barrel.
Volatility for the US Dollar is likely as votes are counted and the incumbent President's inaugural speech will be the source of much discussion, particularly in the economic and foreign policy sectors.
Euro - European Markets
Euro is also suffering volatility pending the ECB decision, at 1.2397 versus the Pound and 1.2645 against the Dollar.
From Switzerland this morning is the news that UBS and Credit Suisse have been major victims of the credit crunch, losing 59% and 37% from their share prices respectively. More negative news from the Eurozone is that France is likely to breach EU borrowing limits as budget deficits increase with stalled economic growth and Spanish job losses have increased by 7.3% for October, making it one of the highest EU nations for unemployment.
Swiss Consumer Price Index and EMU Producer Price Index are due today.
The Reserve Bank of Australia will announce an interest rate decision today.