Pound Sterling - UK Markets

The pound is down 0.8% on the US dollar this morning and over 1.4% on the yen as uncertainty is high on the international agenda with the outbreak of swine flu in North America. Risk averse trading has dominated overnight sending the pound lower against its major currency partners with the exception of the Australian and New Zealand dollars.

The UK FTSE declined 1.2%, amid fears that an outbreak of swine flu could rupture the fragile market stability and the pound is trading below 1.45 and 1.11 on the dollar and euro respectively. A report from consultancy group Deloitte this morning states that increased manufacturing and export could help the UK out of the financial slump. The weak pound promotes growth in the export sector which could fill the space of contracting financial services. BBA mortgage approvals are out in the UK this morning. 

US Dollar - US Markets

The dollar is stronger across the board this morning, having gained ground due to uncertainty surrounding the extent of the swine flu outbreak, which has caused over 100 deaths in Mexico. The dollar has advanced over 1% on the Australian and New Zealand dollars but has slipped against the yen and euro this morning.

Global stock markets have been dragged lower with the flu outbreak and shares in airlines and travel retailers are particularly hard hit. Oil prices have also declined. Pharmaceutical company GlaxoSmithKline has benefitted, gaining more than 4% in share prices this morning as the WHO has declared the outbreak a ‘public health emergency'. Risk aversion is likely to dominate as uncertainty continues over the outbreak. US auto manufacturer Chrysler is approaching a 30 April deadline for restructuring which may be crucial to the company's survival. Extra Federal funding is contingent upon Chrysler meeting the deadline for restructuring, without which the auto manufacturer is likely to have to seek bankruptcy protection. US GDP figures and the Federal Reserve interest rate decision will affect global markets later in the week.

Euro - European Markets

Having peaked at 1.33 last Friday versus the dollar, the euro has weakened this morning to 1.31 as fears over a global swine flu pandemic support the safe haven currencies. The euro has lost 0.5% on the dollar this morning and declined 1% against the yen. The euro has gained against the Australian, New Zealand dollars and pound.

Also weighing on the euro this morning has been uncertainty from the IMF over how best to secure an ‘exit strategy' from the stimulus packages provided during the financial crisis. After presenting a united front at the G20 meeting in London, European nations are debating how best to boost IMF funding and resisting changes proposed by US Treasury Secretary Geithner. The euro, which appreciated against sterling after the budget last week, may stall with the approaching ECB meeting on the 7 of May. Also this morning, the import price index for Germany has declined -0.4% in March, taking the annual rate of inflation to -7.1% and unemployment in Spain has hit 17.4%. EMU consumer, economic and industrial confidence figures are due later in the week.

Other Currencies - Highlights

Asian markets have ended their 6 week rally with the outbreak of swine flu. The yen is trading at a stronger level against its international partners due to the rise in risk aversion as the SARS epidemic remains fresh in the minds of Asian investors. The Japanese government has predicted the economy will contract -3.3% this fiscal year on the back of reduced export levels and corporate spending. The IMF has predicted a substantially larger -6.2% contraction. Japanese retail sales figures and the Bank of Japan interest rate decision are due this week.