UK recession will 'last longest'
Pound Sterling - UK Markets
Official figures due out later today are expected to show that the number of people in the UK who are unemployed has risen to more than two million for the first time since 1997. Analysts predict that the data for November to January will show that the number of people out of work rose by more than 150,000 during the period. The TUC had claimed earlier this week that there are now 10 jobseekers for every vacancy advertised in UK jobcentres.
The thirteenth consecutive monthly increase in claims was significantly larger than the market consensus estimate for a rise of 87,500 in a Dow Jones Newswires survey of economists last week. Other data released by the Office for National Statistics showed that the number of job vacancies slumped to its lowest level since comparable records began in 2001, while the number of redundancies soared to its highest level since that series started in 1995.
Proposals aimed at overhauling the rules governing UK banking and stopping a repeat of the financial crisis are to be unveiled by the City watchdog. Financial Services Authority chairman Lord Turner will put forward new rules on lending and seek to restrict the ability of banks to take excessive risks. The plans will aim to stop banks lending too much during boom times, which may include limits on home loans. Lord Turner will also recommend that banks publish more and clearer information in their accounts about the risks they are running. A proposal to form a new pan-European body will also be mooted, to set standards for other regulators to follow.
US Dollar - US Markets
Federal Reserve policy makes are set to debate today what to do about the deepening US recession. Officials will determine how to provide further stimulus to the economy, from purchasing more mortgage bonds to buying Treasury securities. They'll also keep the benchmark interest rate as low as zero percent, according to all 71 forecasters in a Bloomberg News survey.
At least three of the top Fed officials want to buy Treasuries or target the supply of money, while Chairman Ben Bernanke has favoured reviving specific credit markets. The Federal Reserve aren't alone in mulling this problem; central banks worldwide are grappling with how to set policy when rates are near zero; the Bank of England started buying government debt this month, and the Bank of Japan said today it would increase its purchases of sovereign bonds.
Elsewhere, data released late on Tuesday showed unexpected strength in the housing market, with a 22.2 percent surge in U.S. housing starts in February. These figures eased fears about the worst-case scenario of another deflationary depression.
Euro - European Markets
European stocks have opened firmer today, as renewed confidence and positive sentiment outweighs the dismal global economic backdrop hanging over the markets. The Euro its highest level in over six weeks against the Pound, with investors trying to position themselves following the UK jobs data, as well as minutes from the Bank of England's last policy meeting.
Buoyed by improved investor confidence after surprisingly upbeat German data, the Euro has been holding close to a one-month high against the US Dollar.
Other Currencies - Highlights
Retail sales in Switzerland increased 1.2% in January after rising at an annual pace of 3.6% in the previous month. Ahead of the release, the Swiss Franc ticked down against the Euro and the US Dollar, but advanced against its other major counterparts.
The breakdown of the report showed that demands for electronic goods rose 9.8%, while sales of healthcare products increased 6.5%. However, discretionary spending on personal goods plunged another 12.1% after falling 20.0% in the previous month, and was followed by an 8.1% drop in cultural goods.