Pound Sterling - UK Markets

The pound reached a two-week high against the US dollar yesterday on the back of improved confidence that swine flu will be contained and recession in the UK is easing. This morning sterling exchange rates are in the vicinity of 1.48 against the dollar and is down against the Canadian, Australian and New Zealand dollars.

A strong performance from London markets yesterday saw the FTSE climb 1.3% in addition to Wednesday's 2% gains on the back of confidence that the global recession is easing. However weak personal consumption and personal spending figures in the US, a key driver of the US and global economy, led sterling to reverse some of these gains as risk appetite subsided in the afternoon. Figures released this morning show there were 39,000 mortgage approvals in March and the PMI for manufacturing climbed to 42.9 from 39.5 the previous month. This has added to the growing view that the decline could be approaching a bottom. The PMI for the construction industry is released on Monday.

US Dollar - US Markets

Results are mixed for the dollar this morning as the greenback has largely gained against its Asian currency partners and declined against its European ones. This morning the dollar is trading at around 0.67 against the pound and 0.75 against the euro.

Chrysler's announcement of bankruptcy yesterday trimmed the three day gain in equities. Fiat is to take a 20% stake while the Treasury will take an 8% stake in the company. President Obama claimed the bankruptcy was a 'short surgical bankruptcy' designed to give Chrysler a 'new lease on life'. For every month the factories are closed it is estimated to shave 0.2% off US GDP. The dollar also received a boost yesterday as surprisingly poor personal spending and personal consumption expenditure, both integral to growth in the US economy, drove investors back towards risk aversion. In the US, factory orders and results of the ISM manufacturing index are out today.

Euro - European Markets

Euro exchange rates have climbed this morning against the dollar and are relatively unchanged against the pound. The euro has also gained over 1% on the Japanese as strong equities support exchange rates for the higher yielding currencies.

Figures released yesterday show unemployment across the 27 Euro nations has reached 20 million. An estimated 419,000 people lost their jobs in March across the 16 eurozone nations and EU officials are predicting a total of 3.5 million jobs to be lost this year. This news in combination with the Chrysler bankruptcy and improved sentiment in the UK drove the euro down yesterday as risk aversion took a hit but the single currency has recovered this morning, finding support above 1.32. Today is Labour day in the eurozone with no economic announcements

Other Currencies - Highlights

Mexico has been forced to shut down whole sectors of its economy in a bid to prevent the spread of swine flu. Non-essential services are to be suspended even as the government has said the number of new cases is stabilizing. The Mexican peso has declined sharply since news of swine flu broke and economists fear the shut down could impact severely on Mexico's already struggling economy.

The New Zealand dollar neared eight-week lows against the Aussie as the RBNZ cut interest rates to historic lows of 2.5% yesterday. This places the Aussie dollar at an advantage in terms of interest rate yields and signals from the RBNZ that rate reductions could continue have weakened appetite for the Kiwi. The Australian unemployment rate has climbed to 8.9% in March, up 0.2% from February. The Australian dollar came near a seven month high on the US dollar and gained sharply on Sterling but eventually slipped as the economic unknowns - swine flu, US stress tests - remain too great to ignore for investors. The Australian house price index is due on Monday.