Polish zloty nears all time low against the euro

The Polish zloty neared an all time low against the euro today over fears of souring currency options at Polish firms and rising concern about Eastern Europe's reliance on foreign debt.

Moody's rating agency said the accelerating recession in Eastern Europe will be more severe than elsewhere due to large imbalances, and it could threaten the ratings of local banks and their western parents. Banks from Austria, Italy, France, Belgium, Germany and Sweden account for 84 percent of all bank loans in Central and Eastern Europe.

Sentiment on the zloty has also been undermined by a Polish central bank report casting doubt on Warsaw's plans to adopt the euro in 2012 – since the report was published on Friday the zloty has fallen more than 8% to 4.9307 per euro, near the all-time low of 4.9453 reached in March 2004.

Dollar rises against the pound amid thin trading

Trading was thin on the ground yesterday as US markets were closed for President’s Day. The dollar rose against the pound on the back of risk aversion which caused investors to flock to the safe haven of the dollar. Additionally Japan announced on Monday that growth had fallen by more than 3% in the last three months of 2008, the worst result in 35 years. The pound remained weak predominantly due to the fact that the G7 meeting failed to refer to it at the weekend. It is also expected that sterling will weaken further today in anticipation of a report due out which is expected to show a slowdown in inflation in the current bleak economic situation.

There are several significant announcements taking place in the US today including the NY Empire State Manufacturing Index, TIC Flows and the NAHB Housing Market Index. In the UK, Consumer Price Index, House Price Index and Retail Price Index data will be released at 09.30 GMT.

Pound remains under pressure against the euro

In a quiet day for trading, the pound remained pressurised against the single currency as concerns over Lloyds Banking Group heightened banking sector worries and after the Group of Seven finance ministers made no comment on the currency. Indeed, rating’s agency Moody’s downgraded Lloyds senior debt to A1 from Aa1 and the group’s financial strength rating form B+ to C+, confirming the major concerns surrounding the bank at present. News out of the eurozone was little better as it was revealed that the European Commission will launch disciplinary steps against France, Spain and Greece for exceeding the EU’s budget deficit limit of 3% of GDP.

The major news this morning will surround the UK’s inflation figures and ZEW releasing their economic sentiment survey within Germany.

Euro falls to 2-month low against the dollar

The dollar rose across the board yesterday, pushing the euro to a two month low amid concerns about a recession in eastern Europe and the knock-on effect on European banks. Credit rating agency Moody's said the recession in Eastern Europe was likely to be more severe than elsewhere and would put credit ratings of local banks and their Western parents under pressure, fuelling investor jitters about the region. The report stoked euro selling which, along with investor risk aversion, helped propel the dollar higher against the euro, the yen and the pound.

The German ZEW Economic Sentiment survey is released this morning and Trade balance figures are also due from the eurozone. In the US Total Net TIC Flows, ABC Consumer Confidence and Empire Manufacturing data are released this afternoon.

Australian dollar weakens slightly against the pound

The Australian dollar weakened slightly against sterling yesterday, in subdued trade due to a US holiday. The aussie remained weighed down by risk aversion after the weekend G7 meeting and concerns over Japan heading into recession. Today investors will eye key UK inflation data for further direction. Analysts expect the January figure to fall from 3.1 percent to 2.7 percent.

New Zealand dollar remains on the back foot

The New Zealand dollar remained on the back foot overnight as fresh gloomy economic data around the world continued to keep investors cautious about taking on any further risk. Data also revealed a sharp fall in producer prices, and activity in the New Zealand services sector fell to a record low in January. Falling inflation means the likelihood of further substantial rate cuts remains a real possibility.