Pound Sterling - UK Markets

Sterling remains under pressure internationally, trading just above recent lows against the Dollar and Euro. The Pound is up against the Asian currencies, having gained 0.11% on the Yen this morning.

The announcement of fourth quarter GDP figures on Friday sent the Pound to its lowest level since 1985 versus the US Dollar. With the economy having contracted -1.5% already, Sterling remains under pressure as a second series of tax cuts and emergency capital injections are looking likely for the UK. The exception appears to be Barclay's, which despite announcing £8 billion write downs last year, has gained 40% in share prices this morning. This comes after the chief executive and chairman penned an open letter reassuring customers of their profitability. Steelmaker Corus has announced 3500 jobs cuts, more than 2000 of which could be in the UK as the credit crunch continues to force redundancies in the manufacturing sector. Mortgage approvals in the UK have increased to 22 100 in December following 17 773 in November. There is no further data in the UK today. 

US Dollar - US Markets

The Dollar has weakened against the Pound and Euro this morning to 0.73 and 0.77 respectively, whilst strengthening against the Yen and Australasian currencies.   

This week Congress will debate the delivery of an $800 billion rescue package from President Obama and his team of advisors. The plan is expected to cost 5% of GDP and create 4 million jobs in the US. House prices have fallen an average of 10% across the country and new home sales figures are due this afternoon. The Federal Reserve is due to make an interest rate decision this week with the base rate currently sitting at 0.25%.

Euro - European Markets

The Euro remains under pressure, a result of deepening economic downturn and the expectations of further interest rate cuts from the ECB. This morning however, risk aversion and market focus on the UK has seen the Euro make gains on the Pound, Dollar and Asia Pacific currencies.

Friday's PMI figures showed the Eurozone economy continued to contract in January 2009, notably in the manufacturing and services sector. Phillips, Europe's largest electronics producer is to cut 6000 jobs after a downturn in sales figures as a result of the credit crunch. The Euro has suffered record lows against the Yen recently and Credit Suisse has predicted the Swiss franc will gain 2.6% this quarter on the Euro. Figures in Poland show retail sales rose by 5.6% in December and unemployment has risen to 9.5%. There is no major data from the Eurozone today with German IFO business climate and Eurozone current account released tomorrow.

Other Currencies - Highlights

The Bank of Japan announced a deterioration of economic conditions in its meeting last week, with expectation of worse to come. Foreign trade data declined in quarter 4 of 2008 and the Bank has forecast a -2.6% contraction for the Japanese economy in 2009. Yet despite this, the Yen has continued to strengthen, reaching record highs against the Euro last week and sitting just under all time highs against the US Dollar. The strength of the Yen is exacerbating impacts of the downturn for exporters and creating a growing disparity between the economic situation in Japan and the value of the currency internationally. Retail sales and industrial production figures for Japan are due later in the week.