Sterling makes step declines on risk aversion move

US Dollar: The dollar rose against the majors yesterday which has continued into this mornings session after US stocks plummeted on Thursday afternoon in a furious sell-off accelerated by automated orders and possible erroneous trades. As its US afternoon low, the Dow Jones was down nearly 1,000 points, or 9%, on track for the biggest one-day point decline in its history. The Dow recovered much of that loss but still ended with a 347.8 point drop, off 3.2%. Sentiment took a beating as the worries regarding Greek debt continue to spook the mar¬kets, leading investors to run for safe haven places. The dollar being the usual suspect took 3 cents off sterling to trade under the $1.47 level and the greenback took over a cent off the battered euro to trade below the $1.26 mark. Today’s nonfarm payrolls at 13.30 may offer some distraction in the short term but ultimately the euro¬zone debt crises will be of upmost importance. We may see the dollar gain some more today if the nonfarm pay¬rolls numbers show the expected gain in jobs, strengthening the idea of the US economy recovering at a pace more quickly than its peers. Data: 13.30: Nonfarm Employment Change 198k from 162k, Unemployment Rate 9.7% unchanged + Average Hourly earnings MoM 0.2% from –0.1%.

Pound: Sterling sellers were lapping up the huge losses seen in the value of the euro yesterday as GBP/EUR rallied to 1.18 as global investors dumped the single currency in droves. The contagion effect is taking place in the eurozone as other countries are now being singled out in how they will pay their worrying debt levels. But, the UK is not to be left out of this new group as credit agencies have already pointed to the UK’s triple A credit rating, and that if the UK does not pay down its debt levels soon enough, the highly prized rating may be at risk. Last night and this morning saw the pound lose some of those gains against the euro as investors worry that the UK election stalemate could make it more difficult for the country to pare its substantial debts. Looking at the value of cable, we see a completely different picture as the pound was smashed against the dollar with inves¬tors running for cover as a safe haven place for their funds as fear gripped the markets. Cable fell from $1.51 to below the $1.47 level.
Data 09.00: Halifax HPI MoM 0.6% from 1.1%. 09.30: PPI Input M/M 1.0% from 3.6%.

Euro: On Thursday the euro dropped to a fresh 11 month low against sterling to trade at 0.8474 and a 14-month low against the dollar as investors fled riskier assets over concerns that sovereign debt problems could engulf the weaker eurozone members. Concern that a sovereign debt crises in the eurozone could spread across the regions periphery has moved from hitting just the common currency and government bonds to all asset classes. The panic washing over the market is forcing a massive deleveraging, turning the contagion wor¬ries into a full virus. The euro had earlier fallen sharply after the ECB President Jean-Claude Trichet offered few words to soothe investors nerves over the possible spread of Greece’s debt problems to other eurozone mem¬bers struggling with deficits such as Spain and Portugal. Trichet failed to offer any new initiatives to address the debt crises during a news conference following the ECB’s regular interest rate meeting, where it left rates un¬changed at 1.0%.
Data 11.00: German Industrial Production MoM 1.5% from 0.0%.

General:
• Oil slumped Friday as investors sentiment took a hit from growing worries about the potential economic fallout from the Greek debt crises. Oil fell to $76.94 per barrel.

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GBP/USD	1.4691
GBP/EUR	1.1611
EUR/USD	1.2660
GBP/JPY	135.01
GBP/AUD	1.6620
GBP/NZD	2.0814
GBP/ZAR	11.5572
GBP/CHF	1.6408
GBP/CAD	1.5517
GBP/SGD	2.0605
GBP/THB	47.49
GBP/HKD	11.4301 red-down; blue-up (snap shot)