Monday, the pound showed strength against its major counterparts as Britain's leading share index gained, extending the benchmark FTSE 100 Index's four-week rally, as investors speculated the worst of the recession may be over.
Britain's top share index gained 1.2 percent in early today, as improved investor sentiment lifted banks and energy and mining stocks rose, tracking buoyant commodity prices.
By 3:49 am ET the FTSE 100 was up 48.54 points at 4,078.21 after losing 2.3 percent to close 95.30 lower on Friday.
Positive closing by Wall Street on Friday, comments by Fed Chairman Ben Bernanke and U.S. Treasury Secretary Timothy Geithner on Sunday also lifted the sentiment across the markets.
Bernanke, while speaking at Charlotte on Friday, said that the Federal Reserve will use all possible tools at its disposal to help the U.S economy come out of the recession. While not offering any timeline for recovery of the U.S economy, Bernanke stated that the initiatives are beginning to yield positive results. He pointed out the increase in refinance activities and drop in mortgage rates as examples of response for the Fed initiatives.
Treasury Secretary Timothy Geithner Sunday saw encouraging signs for the recession-hit U.S. economy and said it was too early to say if he was going to ask Congress for more stimulus money as the economic stimulus package announced so far slowly makes it mark in the economy.
He said the government stands ready to force out banking bosses and install new management if their companies have to return for more bailout money.
On Friday, the Dow closed up 39.51 points or 0.5% at 8,018, the Nasdaq closed up 19.24 points or 1.2% at 1,622 and the S&P 500 closed up 8.12 points or 1% at 842.
Today, UK Prime Minister, Gordon Brown will meet Bank of England Governor Mervyn King and Chancellor of the Exchequer Alistair Darling. Reports said Brown will discuss how to implement new regulations laid out in G-20 summit last week.
Financial Services Authority Chairman Lord Turner and Trade Minister Mervyn Davies will also attend. Brown also intends to meet commercial bank executives.
The pound climbed to a new multi-week high against the US dollar, 9-day high versus the Swiss franc and extended its new multi-month high against the Japanese yen.
Against the US dollar, the British pound traded higher during early deals on Monday. At 2:45 am ET, the pound-dollar pair climbed to a new multi-week high of 1.4953, compared to 1.4843 hit late New York Friday. If the pair gains further, 1.508 is seen as the next target level. The pair is currently quoted at 1.4919.
The British pound that closed Friday's North American session at 0.9092 against the European currency edged higher to 0.9055 at 3:00 am ET Monday. The euro-pound pair is currently quoted at 0.9075 with 0.880 seen as the next target level.
The Euro-zone sentix investor confidence for April, retail sales and the PPI reports for February, which were released today likely influenced the euro.
The Sentix investor confidence for the euro area improved to minus 35.26 in April from minus 42.67 recorded in March. Economists had expected a reading of minus 40.4 for April.
Euro zone retail sales volume dropped 0.6% in February from January, a report from the Eurostat showed. Economists were expecting retail sales to drop 0.4% in February after rising 0.1% in January. Year-on-year, retail sales slipped 4%, larger than the 1.7% decrease seen in January and 2.5% decline expected by economists.
Euro zone's producer price index dropped 1.8% year-over-year in February, after falling 0.7% in January. Economists were looking a decline of 1.5%. On a monthly basis, producer prices declined 0.5% in February, compared with a revised 1.1% in the previous month.
Against the Swiss franc, the British currency showed strength during Monday's early deals. At 3:00 am ET, the pound-franc pair reached a 9-day high of 1.6892, compared to Friday's closing value of 1.6780. The next upside target level for the pair is seen around 1.704. The pair is now worth 1.6854.
The British pound extended its Asian session gains against the Japanese yen during early European deals on Monday. At 4:50 am ET, the pound-yen pair rose to 151.57, its highest mark since November 12, 2008. On the upside, 160.7 is seen as the next target level for the UK currency. The pair that closed Friday's New York deals at 148.82 is presently trading at 151.09.
The Japanese yen plunged to new multi-month lows against its major counterparts as risk appetite grew on increasing confidence that the worst for the global economy is over.
The Japanese government intends to compile a new stimulus package worth 2% or more of gross domestic product, Finance Minister Kaoru Yosano told reporters after meeting Prime Minister Taro Aso today.
Accordingly, new fiscal spending would exceed 10 trillion yen. Details of the third package are likely to be finalized by April 10.
A report from Japan's Economic and Social Research Institute said the leading index decreased to 75.2 in February from 77.2 in the previous month. Economists expected the indicator to come in at 75.3.
The Bank of Japan kicks off its two-day monetary policy meeting and will announce any adjustments to interest rates at its conclusion tomorrow.
The BoJ is expected to hold its target rate at 0.10% at its monetary policy meeting, but economists say the central bank's assessment of the economy could be changed, or measures to support corporate finance could be expanded.
Turning to the U.S., the Fed governor Kevin Warsh will speak about the financial markets at a conference in Washington D.C. at 1:00 pm ET.
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