Pound Sterling - UK Markets

Sterling strengthened significantly in the aftermath of the rate decision, reaching 1.47 against the Dollar and a 2 month high against the Euro. Sterling is currently trading at 1.14 against the Euro, 1.46 versus the Dollar and has gained ground on its major currency partners.

The MPC noted the ‘severe and synchronised downturn' as justification for the 0.5% reduction as general unease remains over the state of the UK economy. The IMF and NISER have both predicted over 2% contractions for the UK in 2009 and industrial production figures out this morning show orders at their lowest level since 1981. Manufacturing is also down 10% on the year to December. BA has announced a £70 million profit loss in the 9 months to December on the back of higher oil prices, reduced demand and the weak Pound. Halifax has noted house prices have risen 1.9% in January, following a cumulative 17.3% drop the previous year. There is no further data out today but the Pound is likely to be affected by US employment figures this afternoon. 

US Dollar - US Markets

The Dollar is declining against the Pound and Euro this morning ahead of the release of crucial employment statistics in the US later today. The Dollar is also down against its European currency partners and has made gains on the Yen.

Non-farm payroll figures, hourly earnings and the official unemployment rate are released in the US this afternoon and this is likely to affect the tone of global equities. Closely tied to consumer confidence and business sentiment, the unemployment rate is a crucial indicator of the health of the US economy. It is expected to rise to 7.5% and this could place increasing pressure on policy makers to protect US industries. President Obama has already come under fire this week for the ‘Buy America' clause which has been interpreted as a form of protectionism by UK and EU authorities. The figures are released this afternoon.

Euro - European Markets

The Euro lost ground to the Pound and Dollar overnight after the ECB voted to keep interest rates on hold at 2%. The Euro is currently trading at 1.27 versus the Dollar and 0.87 versus the Pound. 

In his speech yesterday President Trichet signalled a further rate cut in next month's meeting but ruled out calls for zero interest rates and quantitative easing. Eurozone inflation fell to 1.1% last month and the economic situation continues to deteriorate. This morning Swiss unemployment figures increased to 3.3% in January from 3.0% the previous month. German industrial production figures are out today.

Other Currencies - Highlights

Australia's Central Bank has slashed inflation and GDP forecasts this morning. This week the RBA made a 1% rate reduction to offset the downturn in demand and the bank is still forecasting 0.25% growth in the 12 months to June 2009
Toyota, the world's biggest manufacturer has predicted a 450 billion Yen loss in 2008 as global demand slumps. This write down is 3 times larger than previously thought as the strong Yen is hurting importers and Moody's has cut the credit rating of the manufacturer. The Canadian unemployment rate is also due out today.