Pound Sterling - UK Markets

Sterling has plunged this morning, trading below 1.4 against the US Dollar and losing ground against all its major currency partners amid market unease over the health of the banking sector.

Shares in Lloyds and HSBC have plunged in value amid fears over further losses in the banking sector. Lloyds shares lost 14% in London this morning as the bank ceded control to the government after their 70% nationalisation in return for insurance on over £260 billion worth of risky assets. The British Chamber of Commerce has predicted unemployment will hit 3.2 million, or 10% of the UK workforce by 2010. The BRC regards the promotion of business activity as crucial to lifting the economy out of recession and the government has spent £20 billion since the beginning of the year to increase lending to small business. Industrial and manufacturing production figures for the UK are due tomorrow and the BRC retail sales survey is released.

US Dollar - US Markets

The Dollar has gained on the Euro, Pound and Yen as risk averse investors favour the world's foremost reserve currency. US equities are in negative mode after dire unemployment statistics on Friday and market fears over the future of AIG.

The US unemployment rate released on Friday showed the economy shed 651,000 jobs in February taking the official unemployment rate to 8.1%. This is a 25 year high for the US and equity markets remain in negative mode this morning. The World Bank has predicted global trade will decline for the most in 80 years and world growth is expected to contract for the first time since WW2. A hangover from massive profit losses at AIG last week is threatening market confidence this morning and AIG has appealed to US regulators for funds for the fourth time since the credit crunch began. The appeal for further aid was made on the basis that failure at AIG would ‘cripple' world markets as insurance is crucial to supporting the sense of risk a capitalist economy requires. Today is light for US data with the Washington Post Consumer Confidence survey due tomorrow.

Euro - European Markets

The Euro shows mixed results this morning, trading at lower levels versus the Dollar, Yen and Swiss Franc, although the single currency has gained on the higher yielding Pound, Australian and Kiwi Dollars.

European and Asian equities continued to decline this morning on the back of revised growth predictions from the World Bank and market fears over AIG. The economic situation in Russian continues to deteriorate and Russian finance ministers have flown a team of financial experts from Credit Suisse to advise them on how to deal with potential bank nationalisations. The Russian economy contracted 8.8% in the year to January and unemployment is set to hit 10 million. The unemployment rate in Switzerland has risen to 3.1% in February, up from 3% the previous month. There is no major data from the Eurozone today and Germany's trade balance and consumer price index are due tomorrow.

Other Currencies - Highlights

The Australian Dollar has declined against the US this morning, after falling a total to 21% in 2008. Despite a decline in global trade and reduced commodity demand, the Australian government is optimistic over Australia's economic prospects moving forward and the RBA opted against cutting interest rates last week. Results of a survey of Australian business conditions are out tomorrow.

The Yen is up this morning, boosted by diminished risk appetite internationally despite the country posting its first current account deficit since 1996. This comes as the Japanese export industry collapses due to the significant contraction of export markets and the high value of the Yen. The leading economic index for Japan is out tomorrow.