Pound Sterling - UK Markets

Sterling declined against the Euro and the Dollar overnight, down 0.06% against the Euro and 0.57 against the Dollar, to hover just above the 1.70 mark at 1.7092.

Data released yesterday shows net government borrowing in the UK soared to £8.1 billion in September, up from £4.9 billion in September 2007. Now sitting at 37.9% of GDP this leaves the government little room to manoeuvre within fiscal golden rules, which state lending should not top 40% of GDP. These rules however, may be abandoned in 2009 as credit crunch conditions play havoc with the domestic economy and the government may be forced to accelerate their spending, making up the shortfall in a declining economy.

News that mortgage lending has slumped by 42% this year and CBI trends due to be published later in the day will likely further disadvantage Sterling in the currency markets. Bank of England Governor King is due to speak this evening and Bank of England MPC Minutes are released tomorrow.

US Dollar - US Markets

The US Dollar strengthened substantially over Sterling last night, as Bernanke's speech endorsed a package of economic stimulus for the US and on the back of more stable oil prices which are now hovering around US $71-72 a barrel.
There are now fears amongst American economists that the recession could be turning a generation of Americans into ‘savers' as lower house prices, restricted credit and high inflation curtail household budgets. In an economy founded upon conspicuous consumption, this is a thought surely as chilling as recession. The IMF is predicting world economic growth will grind to a halt in 2009 with a slow recovery thereafter.

A Consumer confidence survey is due out in the US today and Treasury Secretary Paulson is to speak.

Euro - European Markets

The Euro also declined against the strengthening Dollar overnight, down 0.48% to 1.3248.

Yesterday brought the news that France is to invest in €10.5 billion in the nations top 6 banks to boost lending as part of the 360 billion Euro package announced earlier in the month. European equities responded well in early trading, rising along with Asian markets yesterday as sentiment works upwards from last week's crisis levels. Europe's Dow Jones advanced 1% while MCSI's Asia Pacific Index jumped 2.3%.
The next set of influential data due from the Eurozone is the EMU current account due on Thursday.