Pound Sterling - UK Markets

Sterling is down over half a percentage point against the Euro this morning to 1.2557 and has declined 2.03% against the Dollar overnight to 1.8004.

Statistics reveal UK second quarter growth in at 0%, following 0.3% in the first quarter. Predictions for growth in the third and fourth quarters are also erring on the negative side meaning the UK could slip into a technical recession.  

The Service Sector Survey, a key piece of data covering up to 40% of the UK economy, is due on Friday. Predictions here are also negative, increasing the likelihood of interest rate cuts in the near future. Sterling is likely to suffer further volatility as terms of the Congressional Deal are negotiated and if negative growth statistics persist throughout the third and fourth quarters.

US Dollar - US Markets

The US Dollar and equity indices strengthened yesterday as Bush, Bernanke and Paulson lobbied Congress for approval on the Federal bail out package. This morning the IMF has weighed into the debate, urging Congressional approval of the package. After the rejection of Monday's, market activity indicated there was no alternative for Congress, a compromise must be reached. Amendments to the plan are expected with a new vote being held as early as this evening. If approved, the Dollar is expected to strengthen further, likely at the expense of Sterling.

US mortgage applications, employment, construction spending and manufacturing data is out today.

Euro - European Markets

The Euro is faring better than most as news centres on the US Congress this week. It has lost 1.35% overnight to trade at 1.4336 versus the Dollar in a surge of confidence regarding the Federal package.

President Trichet spoke yesterday, urging Congress to reach a resolution for “the sake of global finance.” He also quashed speculation of a similar style package for the ECB, despite five major banks facing partial nationalisation at present, citing the fundamental differences between the Federal Reserve and the ECB as the reason.

The ECB interest rate decision is due tomorrow, which could induce further volatility for the Euro.

Global Markets

Optimism surrounding the Federal Reserves rescue package has lifted oil prices to around $95-$100 a barrel mark. The Swiss Franc and Japanese Yen are the only major currencies to make gains on the US Dollar and Euro this morning, indicative of their safe reputation in the midst of global uncertainty.