Pound Sterling - UK Markets

The Pound is currently trading at the firmer level of 1.41 against the US Dollar and is up to 1.10 versus the Euro. The financial centre of South East London has been severely affected by disruption to transport networks making it a thin day of trading for the capital.

Sterling strengthened on Friday against the Dollar and Euro as better than expected figures showed mortgage lending had improved in December. The Federation of Small Businesses (FSB) is estimating the cost of the snowfall at £1.2 billion as approximately 20% of people cannot get to the office today. PMI for the manufacturing sector released today remained weak in January, although the statistics did also show an unexpected rise to 35.8 from 34.9 the previous month. Further survey data out this week will provide a good indicator of UK economic prospects moving into 2009. The US and Eurozone are the UK's biggest export markets and downturn there will impact heavily on UK manufacturing and industrial orders. The MPC is to meet later in the week with a 0.5% reduction expected. There is no further data from the UK today.

US Dollar - US Markets

The US Dollar has regained ground this morning, trading at 0.70 versus the Pound and 0.78 versus the Euro. The Dollar is also up against the Asia Pacific and other European currencies as risk aversion was revived on Friday with the announcement of GDP figures.

Fourth quarter statistics showed the US economy contracted at record pace in 2008, confirming a technical recession for the world's largest economy. With contraction expected to continue into the first quarter of 2009 this highlights the need for an economic stimulus package in the US. Personal spending figures out in the US this morning show a decline of 1% in the month of December and pending home sale are released tomorrow. 

Euro - European Markets

The Euro is currently gaining on the US Dollar and Pound as London trading is severely affected by a blizzard in the capital. The Euro has recovered some of its recent losses, suffered as a result of weakening data from the Eurozone. The Euro is currently trading at 0.90 versus the Pound and 1.27 versus the Dollar.

Negative data continues to flow from the Eurozone with Friday's regional unemployment rate showing a 0.2% rise in December to 8%. Manufacturing figures from Eastern Europe show a rapid decline in January for Hungary and the Czech Republic with Poland declining at a less rapid pace. Manufacturing has contracted across the region in January and the ECB is coming under increasing pressure to cut interest rates further. Their decision is due on Thursday.

Other Currencies - Highlights

The Australian and New Zealand Dollars have taken a hammering overnight as risk appetite fell away with the release of historically weak GDP data in the US. Both currencies are significantly weaker as risk aversion continues to pressure the trade based economies. Downturn in their major export partners is also contributing to a gloomy economic outlook. The New Zealand unemployment rate is out tomorrow.