Pound continues to strengthen against the euro

The pound continued its recent upward trend against the single currency yesterday as investors were reassured by better than expected earnings at Barclays bank. Shares in the bank rose by more than 10% in response to the news, as there was a realisation that the bank did relatively well considering the economic turbulence of 2008. Indeed, sterling’s gains came despite Labour’s school secretary Ed Balls warning that the world is facing up to its worst recession in more than a century.

The Royal Institute of Chartered Surveyors reported overnight that interest in the housing market continued to pick up in January, although the average number of transactions showed little change, as the housing market remains sluggish in tight credit conditions. The UK releases its trade balance data this morning, whilst there are no major announcements due in the eurozone.

Sterling makes gains against the dollar

The pound started the week well against the US dollar, strengthening by 0.83 cents to close that day at 1.4895. The pound’s strength came from the announcement of better than expected earnings from Barclays bank who posted pre-tax profits of £6.1 billion for 2008. Improved investor sentiment was also coupled with lingering concerns for the US economy after Friday's poor unemployment data in the US, and investors remained cautious over Obama's fiscal stimulus package.

In today's trading the dollar has strengthened back over the pound, reaching as low as 1.4775 ahead of the announcement by Treasury Secretary Timothy Geithner about the details of a new bailout plan. This will take place at 16.00 GMT, before the announcement of ABC/Washington Post Consumer Confidence figures at 22.00 GMT.

Euro strengthens against the US dollar

The euro strengthened over the US dollar by 0.35 cents on Monday to close at the 1.3002 as uncertainty over the announcement of details for a fiscal stimulus package and further bank bailout surfaced. At 16.00 GMT today there will be an announcement by Treasury Secretary Timothy Geithner about the details of the new bailout plan, and the market will remain cautious until the particulars are confirmed. Investors speculate that the new plan will move away from the idea of having a stand alone, government backed 'bad bank' and instead propose a public-private partnership that could buy up to $500 billion worth of distressed assets.

In today's trading the euro has fallen significantly against the dollar, reaching as low as 1.2812 as news that Russian banks have asked their government to try and renegotiate the repayment of up to $400 billion worth of debt to foreign banks. This hurt the euro as Russian banks have very close ties with their European neighbors who may be significantly exposed to these debts. Later today ABC/Washington Post Consumer Confidence figures are announced in the US as well as details of the new bank bail out plan. There are no major economic announcements in the eurozone today.

New Zealand dollar remains solid

The New Zealand dollar remained solid yesterday as investor risk aversion improved on the back of hopes for a quick passing of the US stimulus package and further plans to help the banking sector. Retail sales are due later this week, however until then the kiwi’s direction will be driven by broader market movements.

Australian dollar remains range-bound

The Australian dollar remained largely in recent ranges in choppy trade yesterday, as Britain's share market gained for a fifth straight day. The gains were led by banks after Barclays beat profit expectations. Investors will eye key UK trade data today which will give a better picture of how its export market is faring. The EU is Britain's largest market and the rapid downturn there is unlikely to bode well for UK exports. Markets will also focus on the US government’s release of its banking rescue plan. Given that the UK relies heavily on its financial sector this will be of particular importance.