Pound Sterling - UK Markets

Sterling was up against the US Dollar immediately following the election result, however the Dollar had recovered later in the day, sending the Pound back down to the 1.5858 level.

Negative domestic data in the UK continues to fuel speculation of an aggressive rate cut by the MPC. The PMI for Construction came in weaker than anticipated yesterday, down to 35.1, the lowest level since 1997. This could prove to be one of the areas where Government steps in to fill the economic void with the Chancellor's pre-budget report expected to allocate funds to major infrastructure works. Marks and Spencer posted a 34% loss in profit as the credit crunch affects retail spending and gas and electricity prices have risen by 30% in the last year.

The pending MPC decision is putting pressure on Sterling, while 0.5% could lower the value of the Pound internationally, ironically a 1% rate cut could be interpreted as hawkish policy by markets, bringing strength to the Pound.

US Dollar - US Markets

News of Obama's victory is dominating US markets and global airwaves. Having swept to a decisive victory overnight, Obama's work is just beginning as the financial crisis and war in Iraq and Afghanistan will be among the first issues the first black President will have to confront.

Following Obama's victory, the US Dollar declined to its lowest rate against the Euro since the Euro's inception but solid recoveries were posted in later trading. US stock index futures also declined reflecting the depth of the economic and foreign policy challenged facing the 44th President but again have recovered this morning.

Concern over future of global economy remains paramount and all eyes will be on Obama to see the much touted ‘change' made evident in financial markets.

Euro - European Markets

The Euro gained against the Dollar overnight but has since dropped back to 0.77605 and 1.1829 against the Pound

Eurozone PMI for services contracted in October and Retail Sales have declined, down 0.2% from August and 1.6% from September on the back of unemployment fears throughout the 15 nation region.

The Euro, along with the Pound, is steady in anticipation of interest rate cuts by the ECB tomorrow morning. If the MPC slashes rates more readily than the ECB, this could mean strength for the Euro over the Pound.