Pound Sterling - UK Markets

The Pound is gaining on the US Dollar this morning, trading at 1.45 and has gained over 2% on the Yen as a degree of risk appetite returns with the announcement of better than expected retail sales figures in the US. The Pound has also gained 1.4% on the Euro this morning, trading at 1.12 and is stronger against its Asian and Australasian currency partners.

Positive retail sales figures in the US provided a boost to risk appetite overnight which saw Sterling recover some of the ground lost yesterday. Gloomy industrial production statistics for the Eurozone and an absence of UK data have also helped the Pound to strengthen. This morning Virgin Atlantic has announced 600 job cuts which amounts to 7% of its workforce as recession is affecting long haul travel figures. The recession has also hit the football industry with Chelsea posting a £65.7 million loss in the year to June 2008. Today is light for UK data with consumer and retail price indices due early next week.

US Dollar - US Markets

The Dollar has declined overnight as a degree of risk appetite returns to markets. Sliding 1.6% against the Pound and 0.3% against the Euro, the Dollar is also weaker against its major European and Australasian currency partners.

US retail sales figures released yesterday showed a 1% increase in January, breaking a slide of 6 consecutive months. This gains back one third of the retail spending drop in December and provided a slight boost to equities in an otherwise unremarkable week. The retail sales figures also fuelled optimism that interest rate reductions and monetary easing policy are starting to impact on the wider economy. The price of oil remains in the region of $45 a barrel as unease continues over when the turning point for recovery will be. There is no major data out in the US today. 

Euro - European Markets

The Euro is up this morning, recovering from two week lows against the Dollar to trade at 1.29 and is down nearly 1.3% on the Pound to 0.89. The Euro has also gained on the Swiss Franc, Yen and most of its European currency partners.

GDP figures for the Eurozone this morning show the economy has contracted -1.5% in the final quarter of 2008, taking year on year GDP down by -1.2%. The German economy, the Eurozone's largest, has also contracted by -2.1% in the fourth quarter of 2008, dragging year on year growth down to -1.6%, the worst performance since 1990. Industrial production figures for the Eurozone yesterday showed a -2.6% decline in December, taking annual levels to -12%. This contraction is deeper than UK figures and could be a source of Euro weakness to come. There is no further data from the Eurozone today.

Other Currencies - Highlights

The Australian and Kiwi Dollars remain volatile, subject to macro-economic trends and pressured by increasingly negative economic data. The Australian Senate has passed the AUD42 billion rescue package which was held up in a tied vote yesterday, after reaching a political compromise. The plan includes provision for greater public works spending and is equivalent to 1.3% of Australian GDP. In New Zealand retail spending has declined for the fourth consecutive month and home sales have slumped to their lowest level in 20 years.

Egypt has lowered interest rates for the first time since 2006 as slumping commodity prices have led to easing inflation. The Central Bank reduced the base rate yesterday by 100 basis points to 10.5%. Recession will affect many developing nations through a decline in tourism, trade and remittance income. The Canadian Dollar is faring well as investors seek out the safety of gold as an asset. Figures regarding foreign investment in Canadian securities are due on Monday.