Pound Sterling - UK Markets

The Pound is trading at 1.47 against the Dollar this morning having weakened ahead of UK trade statistics. Sterling has also advanced to 1.14 on the Euro and is up against the South African Rand and Swedish Kronor this morning.

UK balance of trade figures have come in at -£3.60 billion reflecting a downturn in consumer expenditure and contraction in the UK's two biggest export markets, the US and Eurozone. The British Retailers Consortium has shown retail sales have risen 1.1% in January in like-for-like sales from this time last year. The rise was driven by a surge in food sales yet sales of all other goods have fallen and it remains to be seen whether these figures are a "blip" in the radar or indicative of a more positive trend. Ed Balls has predicted the recession could be the worst in 100 years as “seismic events” continue to shift the financial landscape. RBS and HBOS former chief executives are to face the Treasury Select Committee over their role in the current financial crisis and bonuses have also come under the political spotlight as it has emerged RBS are to pay up to £1 billion to bank staff. We can expect some volatility for Sterling with the UK unemployment rate and Bank of England Quarterly Inflation Report due tomorrow.

US Dollar - US Markets

The Dollar is gaining against the Pound and Euro this morning as details of the rescue package are to be released in Washington today. The Dollar is also up against its major European and Asian currency partners.

Treasure Secretary Timothy Geithner is to speak in Washington today, unveiling aspects of the Federal plan to revive credit markets and remove toxic assets from bank balance sheets. Global equities have been neutral overnight in anticipation of the announcement and currency exchange rates are still taking their cues from trends in financial markets. A positive reception to the plan could fuel a global surge in risk appetite. President Obama has also announced that the Government would be seeking a credit expansion should the initial $900 billion plan fail. This is an acknowledgement of the criticism from many high profile economists that the plan is insufficient to stimulate credit markets. Timothy Geithner is to speak at 11 am in Washington today and the Washington Post Consumer Confidence Survey is out in the US.

Euro - European Markets

The Euro has fallen overnight to 1.29 versus the Dollar and 0.84 against the Pound amid reports that Russian banks have asked the government to act as an intermediary with foreign creditors. The Euro is also down against the Yen and its other Asian currency partners as global markets remain neutral pending further news from Washington. 

Concerns around the health of the Russian economy are putting pressure on the Euro as European banks are those most exposed to credit losses in Russia. Reports from Russia suggest banks are in trouble with foreign creditors and have asked for government intervention. This comes after the Russian Central Bank raised the repo rate for the second time in a week in an attempt to halt the decline of the Ruble and the Yen has risen for the fourth consecutive day against the Euro. Switzerland's largest bank UBS has reported a 19.7 billion Swiss Franc loss in write downs for its investment arm in 2008. The bank is to cut a further 2000 jobs and focus on ‘core domestic' business for the time being. Swiss CPI also fell 0.8% in January, taking annual inflation rates to 0.1% and prompting further speculation that deflation could be a problem in the Eurozone. German Consumer Price Inflation figures are out tomorrow.

Other Currencies - Highlights

The Australian and Kiwi Dollars have declined against the Pound overnight and gained on the Euro as the Aussie and Kiwi remain vulnerable to wider market movements. The South African economy is being hit by declining metal prices as the global recession reduces commodity demand. Mining accounts for 7% of the South African economy and 24,000 jobs are on the line. The Australian unemployment rate and business confidence figures are due on Thursday.