Markets Fear Recession
Pound Sterling - UK Markets
Sterling came under pressure yesterday as fragile market confidence was rocked by the prospect of global recession. Down to 1.2856 against the Euro and losing 1.34% against the Dollar.
The FTSE yesterday lost 7%, one of its biggest declines in history in response to the news. Unemployment statistics for the UK released show jobless claims are set to reach levels not seen since the 1990's with fears that the jobless rate could reach 2 million by Christmas. Having risen 164 000 to 1.79 million, unemployment is currently sitting at 5.7% and economists predict it could peak at 6.5% as the effects of the latest chapter in the crisis are still to be made apparent.
Sterling does remain relatively strong considering, a factor for which Gordon Brown and his commitment to the crisis can take credit. Markets responded positively to news of the FSA considering extension of the £50 000 pound bank deposit.
There is no major data released in the UK today.
US Dollar - US Markets
The US dollar held strong overnight as safe haven status offset recessionary fears to bolster the currency.
US retail sales, which fell over 1% in August, sparked a downward trend for equity markets yesterday as fears over the prospect of a US led global recession became apparent. For the US and UK, where consumers are key drivers of economic growth, unemployment rates, consumer inflation and retail indices are important measures of the global economy.
Oil has fallen to $69 a barrel and US equity markets took another nosedive yesterday as investors began to doubt the reassurance government intervention could give.
The Fed's Beige book, which gives a snapshot of the countries economic conditions, accompanied by a speech from Bernanke is due this afternoon. The US consumer price index is due tomorrow.
Euro - European Markets
The Euro strengthened slightly yesterday, again bolstered by its link to the US Dollar and haven status.
European markets followed the weakening trend throughout the world and EU leaders have pledged reform in the global financial industry.
Switzerland's UBS and Credit Suisse have been the latest to receive bail out in the recent wave of market shocks and shares the banks had fallen 6% in early trading. UBS will receive a 6 billion Swiss francs credit injection from the government while Credit Suisse has raised 10 billion from private investors. The ECB has also offered to loosen restrictions on securities in an attempt to thaw frozen credit markets throughout Europe.
Italian trade balance data is due this afternoon.