Eyes to MPC, ECB
Pound Sterling - UK Markets
Sterling is trading at 1.1739 having depreciated against the Euro overnight as both currencies await outcomes of the MPC and ECB decisions today. Sterling gained against the US Dollar overnight to trade at around 1.5936 this morning as uncertainty again affects the Dollar value in response to negative domestic data.
UK house prices have fallen a record 14.9% on the year in October, or 2.2% for the month, raising the prospect of negative equity for many homeowners. The contraction or third quarter GDP by 0.5%, rising unemployment and low retail sales and consumer confidence have made interest rate cuts necessary from the MPC. Markets are anticipating a 0.5% reduction with an outside chance of a 1% cut.
US Dollar - US Markets
The US Dollar weakened overnight, with further volatility expected as markets digest news of Obama's Presidency. This morning the Dollar was valued at $0.77425 versus the Euro and was valued at 1.5922 versus the Pound.
The Dollar declined in response to the domestic news that private sector jobs fell by 150 000 in October and General Motors has lost $70 billion worth of profit since late 2004. General Motors, Ford Motors and Chrysler CFO's are to meet with speaker Pelosi over potential aid packages after the US automobile industry has slumped to lowest levels since 1983. Toyota and Adidas also posted profit losses and suffered declines in equity prices as a result. The MSCI lost 2.2% on opening in London and the S&P 500 was down by 0.8% meaning negative economic data erased gains made by Obama's election victory
Euro - European Markets
This morning brings news that the Eurozone is facing its worst economic slump in 15 years, forcing the European Dow Jones 600 Index down by 3%. Economists are predicting economic growth in the Eurozone will shrink to just 0.1% this year. Inflation has slowed in the Eurozone to 3.2% after the 16 year high of 4% in July.
Having raised interest rates as recently as July, a rate cut from 3.75 to 3.25% is likely from the ECB this afternoon.