Pound Sterling - UK Markets

According to the Council of Mortgage Lenders, the number of homes that were repossessed in the UK declined slightly in the fourth quarter. A total of 10,400 homes were taken into possession between October and the end of the year, down from 11,100 between July and September.

However, a report released by the Office for National Statistics showed a surprising lift in UK retail sales in January. The rise is being attributed to the numerous price cuts that UK retailers made during the previous month. Despite the closure of numerous stores, such as Zavvi and Woolworths, retail sales have climbed 0.7% after increasing 1.7% in December. Economists had predicted a 0.1% drop.

US Dollar - US Markets

The Dollar has declined over 1% against the Euro this morning as fears abate over European exposure to bad debts and the US stimulus packages revives appetite for risk. The Dollar is also down over 1% on the Australian and Kiwi Dollars and is down to 0.69 against the Pound.

Yesterday's figures in the US revealed housing starts and new building permits dropped to record lows in January along with industrial production figures which contracted 1.8% for the month. This signals a weak start to 2009 after the US economy contracted 3.8% in the final quarter of 2008. President Obama released details of a $275 billion housing package which is an attempt to address the root of the financial crisis and prevent the rising number of foreclosures on American homes. An estimated 400,000 home owners lost their homes in the US last year. This comes in the same week as the $787 billion rescue package, yet market response remains uncertain as details and growth prospects are unclear. The Federal Reserve have also announced they expect unemployment to rise to over 8.5% and projected long-term interest rates at 2%. The FOMC minutes are released today along with the Philadelphia Fed and jobless claims figures.  

Euro - European Markets

French consumer prices fell in January for the seventh month in a row, but by less than expected, as prices for energy slumped and those of manufactured products remained unchanged. The French CPI report dropped 0.4% on the month, cutting the yearly increase to 0.7%, French national statistics bureau Insee said.

However, other key gauges of euro zone services and manufacturing activity unexpectedly crashed to new lows in February, suggesting that economic contraction in the first quarter of this year may be even worse than the final months of 2008.

Data released by Markit today has shown that the Purchasing Managers Index for the dominant service sector slumped to an 11-year survey low of 38.9 in February, confounding expectations that we would see a rise from 42.2 to 42.4. The data also showed price pressures sinking to survey record lows and is sure to strengthen expectations that the ECB will be forced to cut interest rates when it meets again in March.

Factories in the euro zone fared little better, with the manufacturing PMI also coming in at a record low of 33.6, considerably below the 50.0 mark that divides growth from contraction and, indeed, the 34.4 level seen January. The fall in both sectors took the combined composite index down to a record low of 36.2 from January's 38.3 and well below the 38.5 forecast. The suggestion is that the 1.5% contraction in the economy in the final quarter of 2008 may be even worse in January-March.   

Other Currencies - Highlights

The South Korean Won nosedived to a three-month low against the US Dollar this morning, breaking the 1,500 mark for the first time since November 2008 and closing yesterday at 1,506 Won against the US Dollar. Analysts predict that the Won will stay on this downward slump for the time being at least