Pound Sterling - UK Markets

The Pound was at 1.6152 versus the Dollar this morning but is likely to suffer as negative economic data heightens risk aversion and sends investors flocking to the safe haven currencies.

This morning brought the news that UK consumer confidence has dropped to lowest levels since 1974 this October. The Pound did not react substantially to house price data yesterday and US US policy continues to drive currency trends. Brown and Darling have urged banks to make loans available for small businesses and Barclays has raised £7 billion worth of capital from Middle Eastern investors, rather than have the government take a stake in their shares.

Next major decision from the UK is MPC interest rates, due November 6.

US Dollar - US Markets

The major news out yesterday was the US GDP statistics which showed 0.3% contraction in quarter 3. This however, was accompanied by a 6% increase in exports and was a smaller contraction than expected. Taken in conjunction with the Fed's rate cut yesterday this could serve to strengthen the US Dollar.

US Personal income and personal spending data are due today and will provide further insight into growth prospects as consumer spending makes up 2/3rds of the US economy. 

Oil is hovering around $62 a barrel in the light of recessionary data on fears of weakening global demand. The US Elections next week and pending interest rate decisions in the UK and EU are the next major sources of volatility for the Dollar.

Euro - European Markets

The Euro is broadly weaker today, declining alongside the US Dollar suffering from a raft of negative consumer, economic and industrial confidence data. The Euro has dropped 18% against the Yen and 10% against the Dollar in October as bearish tendencies have favoured the strong Dollar and low yielding Yen.

German retail sales fell more sharply than expected, declined 2.3% since August adjusting annual growth to 1.1%

Bank of Japan cuts rates to 0.3% but the Yen gained overnight as recession data sparked further risk aversion.

The next major announcement from the Eurozone is the ECB interest rate decision due on Thursday 6 November.