Pound Sterling - UK Markets

Sterling has remained strong overnight, trading at 1.42 versus the US Dollar and up to 1.10 versus the Euro. The Pound has also strengthened against the Australian, New Zealand and other European currencies.

Euro weakness overnight allowed the Pound to edge up over 2% against the single currency. This morning the Bank of England has pledged £50 billion towards buying assets in the latest step towards monetary easing. With interest rates at 1.5% the Bank is looking to more unconventional measures of stimulating the ailing British economy. Prime Minister Brown is coming under pressure in Davos to put employment at the top of the G20 agenda after reports the global crisis could leave 51 million people unemployed. Yesterday London Underground announced they are to slash 1000 jobs and Honda is to commence the four month shut down of its Swindon headquarters today, affecting over 3000 employees. Mortgage lending statistics out today show a sharp increase for the month of December with consumer credit figures up to £2.2 billion in December after £1.6 billion the previous month. There is no further data from the UK today with the February MPC decision due next week.

US Dollar - US Markets

The Dollar has remained strong overnight, gaining over the Euro and some of the perceived ‘risky' currencies. Trading at 0.77 versus the Euro and 0.69 versus the Pound, the Dollar is heading for its biggest monthly gains on record against the Euro as recession spreads throughout the region.

President Obama has slammed bankers taking bonuses as ‘shameful' while their industry is being bailed out by taxpayer money. Durable goods orders fell by 2.6% in December and weekly jobless claims have continued to rise along with the monthly unemployment rate in the US. Unemployment is contributing to low consumer confidence and personal consumption, a factor expected to be reflected in the release of GDP and personal consumption figures today. It is thought that the US economy nose-dived in the final quarter of 2008 the Dollar may weaken following the announcement this afternoon. The Fed has also noted there is ‘significant risk' of recovery not taking place until 2010.

Euro - European Markets

The Euro is significantly weaker this morning, suffering from the comments of George Soros and negative economic data. The Euro has dipped to 0.89 against the Pound and is down to 1.28 versus the US Dollar.

The release of economic, consumer and industrial confidence figures yesterday showed deepening recession in the Eurozone. This, in combination with George Soros's comments that the Euro is under threat from exposure to toxic debts pressured the Euro internationally. Iceland is seeking to be fast tracked in to the EU in a last ditch effort to prevent financial collapse. This week the conservative government has collapsed with the opposition party campaigning on the basis of Euro membership. Spanish Central Bank figures this week show the economy in recession for the first time since 1993 as GDP fell 1.1% in the last quarter of 2008 and unemployment rose 3%. The EMU unemployment rate has risen to 8% this morning and the consumer price index declined by 1.1%. There is no further data today with an interest rate decision due from the ECB next week.

Other Currencies - Highlights

Japan is heading for its worst post war recession as export orders and factory output slump. This is still at odds with the strength of the Yen as disparity continues to grow between the internal economic situation and the value of the currency internationally. Despite recent gains, the Nikkei Index has slumped 10% this month and wavering market confidence this morning has fuelled Yen gains overnight.

The New Zealand Dollar remains weak, near recent lows against the US after the RBNZ cut rates to historic lows and risk appetite diminished yesterday. The Australian Dollar is also weaker on speculation over the pending RBA decision next week.