Pound Sterling - UK Markets

Sterling has declined across the board overnight as investors favour risk aversion and the UK unemployment rate rose 0.2% in January. Sterling is currently trading at 1.44 versus the Dollar and has dropped to 1.11 against the Euro. The Pound is also down over 1.5% on the Yen to 129.

The UK unemployment rate has risen to 6.3% in January, a 0.2% rise in line with market expectations. This could have a bearing on Sterling exchange rates throughout the day as unemployment is closely linked to personal consumption and business confidence. The former Chief Executives of RBS and HBOS faced the Treasury Select Committee yesterday to explain the failure of the banking system. Under a grilling from MP's the RBS Former Chief Executive Sir Fred Goodwin apologised for the banks failure yet RBS, of which the taxpayer now owns 70%, later announced 2,300 job cuts. The Bank of England £50 billion facility to purchase assets becomes operational this Friday and the Bank's Quarterly Inflation Report is due today at 10:30 am.  

US Dollar - US Markets

The Dollar has gained from an increase in risk aversion overnight yet equities remain in negative mode after details of the rescue package failed to inspire confidence in markets. The Dollar is down to 0.77 on the Euro and has gained 0.6% on the Pound.

Wall Street took a plunge yesterday as the much anticipated speech from Treasury Secretary Timothy Geithner failed to address the tough issues and quell investor fears in the US. In the eyes of investors three factors need addressing immediately by the Federal Reserve; how to stop banks failing, how to alleviate toxic debt, and how to stimulate property and credit markets. Geithner's speech yesterday was short on specifics and heightened fears that a drop in confidence at this early stage could sabotage the entire package. The Standard and Poor's declined 4.9% following the announcement and crude oil has fallen back to $45 a barrel amidst unease surrounding the US economy. Trade balance figures are out in the US this afternoon.

Euro - European Markets

The Euro has strengthened overnight, benefitting from the increase in risk aversion and the grim UK unemployment figures. The Euro-Sterling exchange rate has climbed to 0.89 and the Euro is up to 1.29 on the US Dollar.

Despite the ascending Euro, equities remain in negative mode this morning, taking their cue from US markets. Switzerland's second largest bank Credit Suisse, announced a $5.2 billion write down in the fourth quarter of 2008. This is significant in that the bank avoided the worst of the sub-prime crisis, yet was hit by the Lehman shocks in its investment sectors. Credit Suisse is to cut 5,300 jobs and shares plummeted yesterday. Car manufacturer Peugeot also posted losses and this dragged European equities down. The German Consumer Price Index is confirmed at -0.5% this month taking yearly inflation to 0.9% and supporting the case for further rate cuts from the ECB in March. There are no major announcements in the Eurozone today and the ECB monthly report is due tomorrow. 

Other Currencies - Highlights

Chinese export levels have plummeted 17.5% due to the global recession and these figures have been reflected in the shrinking trade deficits of major Chinese importers. The Aussie and Kiwi Dollars weakened overnight as risk aversion returned and boosted the safe haven currencies as the US bail out plan failed to inspire market confidence. Australian business confidence and unemployment rate is due tomorrow and New Zealand retail sales figures are released on Friday.