Sterling saw major gains across the market spectrum following the impending takeover of Cadbury by US based Kraft Foods Inc. The euro dropped to a four month low against Sterling, which rose to its highest level in more then a month against the dollar.

Pound Sterling – UK Markets

The pound rose considerably this morning with the news that the USD19 billion Kraft /Cadbury merger to create the ‘world's largest confectionery group’ looks likely to go ahead. It was also reported that Goldman Sachs expected Britain to post stronger growth in 2010 than the other major currencies. It’s certainly a purple patch for sterling right now, but those expecting a break to the next resistance levels should exercise caution; the pound continues to ride its luck and remains vulnerable to any negative data. Sterling rose as high as USD1.641 in the early hours of this morning’s trading, the highest since December 8th. It continues to make gains against the EUR, currently trading at 1.1435.

US Dollar – US Markets

The aforementioned Kraft/Cadbury merger has allowed the pound to make significant gains on the dollar which, as of 0916 GMT traded at 0.608 against sterling and 0.694 versus the euro. Today traders will want to pay attention to the 1400 GMT TIC Long-Term Purchases report, which measures the difference in foreign investment in the US and its domestic investment abroad. The report is a direct indicator of how foreign investors are viewing the US economy.

Euro – European Markets

The euro slipped to a four-month low against sterling in the early hours of Tuesday morning as sterling gained on the Kraft/Cadbury merger. The single currency continues to fall and is currently trading at 0.8741, the lowest since mid-September. EUR/USD trading was relatively stable on Monday largely due to the Martin Luther King Holiday. As of 0923 GMT the pair traded around the 1.439 level, but we have since headed back toward the 1.43 mark.

Other Currencies – Highlights

A resurgent yen made gains on both the euro and the US dollar in recent trading, due to poor economic news from the Western majors. At 0926 GMT the yen traded at USD/JPY 90.52, EUR/JPY 130.29 and GBP/JPY 148.65. Today, traders should expect movement in the yen depending on economic indicators from the Euro-Zone and England.