Negative growth forecast
Pound Sterling - UK Markets
The Pound is stronger against the US Dollar this morning, up to 1.44 and remains in the vicinity of 1.10 versus the Euro. Against the Australasian currencies Sterling is also bullish as negative economic data from the world's major economies is depressing exchange rates in the trade based economies.
This morning the National Institute of Social and Economic Research (NISER) have predicted the UK economy will contract by 2.7% in 2009. This decline will be fuelled by an expected 3.8% drop in consumer spending and an 8.8% decline in business investment as Britain suffers the worst recession in 60 years. UK consumer confidence has also weakened in line with expectations. The Bank of England has provided £185 billion of taxpayer money to banks in the Special Liquidity Scheme and the MPC has undertaken significant monetary easing already. The Bank is set to reduce interest rates to 1% when it meets on Thursday with some economists predicting they could move to zero. There is no major data in the UK today.
US Dollar - US Markets
The Dollar is strengthening this morning, up against the Euro, Pound and its major European currency partners. The Dollar is currently trading at 0.69 versus the Pound and 0.77 versus the Euro.
President Obama has responded to criticism of his ‘Buy America' clause, commenting that he wants to avoid a ‘trade war' at a time when global trade is necessary to financial recovery. The Federal Reserve stimulus package is to promote US manufacturing industries and has come under fire from the EU as a thinly veiled form of protectionism. President Obama has also announced a $500,000 cap on corporate bonuses after banks have asked for taxpayer bail outs. The Federal Reserve stimulus package is currently seeking approval in the Senate and US mortgage application figures are out today.
Euro - European Markets
The Euro is lower against the US Dollar ahead of the ECB interest rate decision and is trading at 0.90 against the Pound.
Unemployment has risen rapidly in Spain, by 199,000 people or 6% in January. The current unemployment rate is 14.4%, significantly higher than other European Union members as property and construction have been particularly hard hit by the recession. The EMU Purchasing Manager Index for Services in January has come in at 42.2 showing a contraction slightly less than expected but still deep in recession territory. Expectations are mixed regarding the ECB rate decision. At the last meeting Trichet indicated that further rate reductions would not be made until March however, accelerating downturn in the Eurozone may spur the ECB into action. Retail sales figures are due this morning.
Other Currencies - Highlights
The Australian government stimulus package has been regarded with optimism by markets and the Aussie Dollar clawed back ground against the US Dollar and Pound yesterday. This morning the Australasian currencies are weaker with a minor return to risk aversion leading the Pound to strengthen back over the Aussie and Kiwi Dollars. Australian retail sales figures and the New Zealand unemployment rate are out today.
Panasonic, Japan's largest electronics company is to cut 15,000 jobs as global recession and the stronger Yen have forced the company into its weakest performance in seven years. Mazda and Mitsubishi have both suffered significant losses as contraction in their major export markets lead to lower purchases of big ticket items. There is no data out in Japan today