Sitting here amongst the London drizzle I cannot help but spare a thought for Allen Stanford the Texan tycoon who is probably hiding on a tropical island somewhere. Stanford, you may recall once put up $20 million for a Twenty20 cricket match and has recently been accused of an $8 billion fraud by the US Securities and Exchange Commission. Perhaps more criminal is the moustache he's sporting but that is by the by… if England had got as many runs on the Antiguan pitch as Stanford had on his Antiguan bank, English cricket would be much better for all involved.

This week the sense of global unease has continued. Equity markets are still the barometer for currency exchange rates and the prevailing economic sentiment has been negative. G7 leaders and the US Government have both failed to provide an immediate blueprint for recovery, despite passing multi-billion dollar rescue packages and risk aversion continues to dominate the headlines.

In the UK, minutes from the February MPC meeting revealed an 8-1 vote in favour of a 0.5% reduction in the base rate and a unanimous vote in favour of quantitative easing. This is where the Bank is set to buy gilts and securities in an attempt to increase the supply of money and alleviate toxic debt in the UK economy. Sterling fell to a two week low against the US Dollar following the news but has rallied against the Euro amid concerns over the economic situation in Eastern Europe.

News has been distinctly negative in the Eurozone this week as we learned that the export-led German economy shrunk by 2.1% in the final quarter of 2008. This was accompanied by over 1% contractions in France and Italy which dragged Eurozone GDP down by 1.5% in the first quarter of 2009. Combined with a 3.8% contraction in the US and a 3.3% contraction in Japan in the final quarter of 2008, this news led to downward pressure on the Euro and a loss of risk appetite throughout the week. Oil also declined to $41 a barrel on the back of this news.

However the major source of pressure for the Euro this week has been reports of economic deterioration in Eastern Europe. This sparked investor fears over the exposure of Western European banks to bad debts and has undermined Euro sentiment all week. Hungarian, Polish and Czech government debt has been downgraded by investors and Zloty fell to a five year low against the Euro.

In the US President Obama released details of a $275 billion housing package and signed off on the $787 billion Federal Reserve rescue package. Both deals are unprecedented in scope and scale yet have still failed to provide the confidence boost so desperately needed by markets. As a result Dollar strength has largely come via risk aversion this week which has kept the Pound low and Australasian currencies lower.

So at present, confidence and growth prospects are determining market sentiment which is determining currency exchange rates. The fact that no one knows how long this recession will last and what needs to be done to remedy it is keeping confidence low and pressuring currencies into ‘consolidation channels' otherwise known as terrible exchange rates. Until we see an upturn in growth, or at least a less drastic downturn, investors will continue to favour short term positions, fuelling yet more currency volatility.

Australasian and Eastern European currencies remain particularly vulnerable as investors continue to dump riskier currencies at a time of unprecedented economic uncertainty. For governments, installing confidence and unlocking credit remain crucial to garnering positive economic sentiment and policy responses require international co-operation. For those with investments in the perceived ‘riskier' regions, keeping a line open to your dealer is the best option so you will be informed of market movements as and when they happen. If recent volatility is anything to go by, this could make a significant difference to your bottom line.

My charity skydive is also drawing near so if you wish to donate that would be much appreciated! You can donate at www.globalangels.org/fundraiser/CurrencySolutions/