Pound Sterling - UK Markets

This morning the Pound is up to 1.48 against the US Dollar and 1.14 versus the Euro. Sterling is also enjoying bullish runs against its major currency partners as the pending approval of the Federal Reserve Rescue package is stimulating risk appetite internationally.

The release of industrial production statistics late last week lead Sterling to weaken against the Dollar and Euro, although this ground has been recovered this morning along with an increase in risk appetite. Industrial production fell by 1.7% in December while manufacturing production fell by 2.2%. These figures were some of the lowest seen since 1981 and reflected an annual decline of approximately 10% in both sectors. Combined with contractions in the service sector, this shows the UK economy well into recession territory and the unemployment rate will continue to rise throughout 2009. The Bank of England's Quarterly Inflation Report is due today followed by trade balance figures, the UK unemployment rate and retail sales indicators later in the week.

US Dollar - US Markets

Results are mixed for the US Dollar this morning against its international currency partners. The Dollar is currently trading at 0.67 versus the Pound, 0.77 versus the Euro and is down against the Yen.

Bleak US job data in the US on Friday renewed fresh hopes that the Federal Reserve Rescue Package will be quickly approved. In January 598,000 jobs were lost, the sharpest decline in 34 years and the US unemployment rate has risen to 7.6%, up 0.4% from the previous month. The announcement of a package could do much to stimulate risk appetite internationally, providing strength for some of the higher yielding currencies. President Obama is expected to urge speedy approval today as the package is seen as necessary for global market confidence. The current deadline is 16 February. There is no data from the US today with retail sales and trade balance figures due later in the week.

Euro - European Markets

The Euro is declining against the Dollar and Pound this morning, currently trading at 1.29 versus and 0.87 respectively as business sentiment has declined throughout the region.

Business sentiment among the 16 member Eurozone has slumped in February, falling to 36.1 on the Sentix Index from 34.4 in January. This is an all time low and a reflection of the declining economic situation in the Eurozone. The Euro has also declined for 2 consecutive weeks against the Pound as market perception remains that the ECB has been foot dragging when it comes to fiscal policy. The Russian Central Bank has raised the overnight repo rate to 12% in a bid to prevent the currencies collapse as speculators are driving it downwards. The Ruble has slumped 35% against the Dollar since August. Today is light for Eurozone data with the ECB monthly report due on Thursday and GDP figures on Friday.

Other Currencies - Highlights

Japan continues to be battered by reduced export demand and strong value of the Yen and car maker Nissan has announced 20 000 job cuts as a result of the credit crunch. Nissan's announcement comes after electronics giant Panasonic announced 15 000 redundancies and Toyota trebled its losses to 450 billion yen last week.

The Australian and New Zealand Dollars have made gains over the weekend on the back of improved risk appetite. Gains in equity markets have fuelled surges in the higher yielding currencies and the announcement of early details of the Federal Reserves $900 billion package could provide a source of strength for the higher yielding currencies.