Pound Sterling - UK Markets

Sterling declined against the Euro overnight, to trade at 1.2575 this morning, while gaining against the US Dollar to reach 1.8508. The Pound is also up against the Australian, New Zealand and Canadian Dollars in a morning of mixed results for the currency.

With sparse hard economic data out this week, the major news is political as the annual Labour Party Conference is underway. Speaking at the Conference, Brown and Darling have both pledged moves to clean up the “City” reflecting public sentiment that is angry at the perceived excess and fiscal irresponsibility of the banking sector. Darling has pledged Treasury will do whatever it takes in the interest of economic stability, while Brown is attempting to capitalise on the current economic crisis to gain advantage in the polls where he currently lags behind Tories by 20 points.

British Bankers Association new mortgage approval data is out today.

US Dollar - US Markets

The Dollar has weakened overnight, declining for the fourth consecutive day against the Euro, posting a total decline of more than 6% since September 11 2008.

Global stocks fell overnight following their rally last Friday in response to news of the Federal rescue package. Paulson and Bernanke, the architects of the plan, are to begin 2 days of congressional hearing today, during which uncertainty will characterise markets and likely weaken the US Dollar. Congressional division over how to implement the plan and realisation of costs to the taxpayer have sent equity indices lower in US, UK, European and Asian markets.

We can expect to see opportunistic deals and mergers over the coming weeks as the daylight dawns on the wreckage of Wall Street crash.

Euro - European Markets

The Euro strengthened overnight, gaining on most of its major currency partners, most notably a 2.21% jump on the US Dollar, trading this morning at 1.4713.

Data released yesterday showed Germany, the largest manufacturing economy in Europe, contracting in September. The manufacturing index fell to 48.1 from 49.7 suggesting third quarter negative growth and the economy tipping into recession. 
Despite this, the Euro has gained some strength on the back of risk-averse investors flocking to Euro-denominated assets as the major reserve currency.

The EMU Purchasing Manager Index is released this morning.