Sterling Under Pressure
Pound Sterling - UK Markets
Sterling has plunged to a five year low against the Dollar overnight after the admission from both Governor King and PM Brown that the economy has entered recession. Having lost 2.35% against the Dollar to open at 1.6301 Sterling had recovered from lows of 1.61 overnight. The Pound is also down 0.60% to 1.2710 against the Euro and declined against most of its major currency partners yesterday.
This caps off a 25% lower against the Dollar and 19% drop against the Euro from a year ago with pressure on Sterling expected to continue as economic recovery is not predicted until the second quarter of 2009. Retail sales for September came in at 1.8 as opposed to the previous months 3.3 illustrating the bearish trend for Sterling, a factor fuelling the unanimous MPC decision last month. The MPC decision is due on the 6th of November, the same day as the ECB, with dismal economic data paving the way for further cuts from the Bank.
On the positive side, LIBOR rates fixed at 6.04%, the lowest in 4 weeks and BBA mortgage approvals were ahead of predictions for September at 23.422. UK GDP data is due tomorrow.
US Dollar - US Markets
The US Dollar strengthened yesterday, reaching a 2 year high over the Euro and five year high over the Pound.
Equities remain in negative mode in reflection of negative trends in the global economy and crude oil has dropped to $66 a barrel as global demand weakens.
Jobless claims and the Housing Price Index are due from the US today.
Euro - European Markets
The Euro is relatively unchanged from yesterday having benefited from Sterling weakness and its secondary reserve status.
Credit Suisse has endured a 1.26 billion Swiss Franc write down in the third quarter of and lost 3.9% in Swiss trading yesterday. Sweden has also cut its lending rate for the second time in as many weeks and revised predictions for growth and inflation. The European current account deficit was in at -8.4 billion.
European stocks received a boost after Nestle, the world's largest food brand and Syngenta, the largest maker of agricultural chemicals, climbed by 4.5 and 3.7% respectively. The Dow Jones added 0.5% to its value breaking its 2 day decline.
The EMU Purchasing Manager Index is due tomorrow and some economists are predicting the Euro strength could be short-lived as the ECB may have to tackle interest rates with the same aggression as the Bank of England in the near future. .