Global stock markets plummeted yesterday as fear and uncertainty massacred the good sentiment that recent bail-out and recue plans had provided. The FTSE recorded its biggest ever points loss in history and the largest percentage decline since ‘Black Monday’ while the Dow Jones finished below the key psychological 10,000 level for the first time in 4 years.

The dollar was able to capitalise on these issues as the desire for safe haven and demand for dollar funds pushed the greenback to fresh multiyear highs against GBP and Euro. Traders reversing carry trade positions alos helped the yen higher as risky positions were liquidated.

A strong move by the Reserve Bank of Australia has heightened the possibility of coordinated rate cut decisions by major central banks. After a near 10% move in the value of GBP/AUD over the course of trading yesterday the RBA decided on a 100bp cut in order to ‘bring about a significant reduction in costs to borrowers’. Further rate cuts are expected around the world in the month of October with the Fed predicted for 50bp, the ECB 25 and the Bank of England this thursday at 25-50bp.

The main news today was actually released as we slept; the NIESR GDP estimate. The National Institute of Economic and Social Research said that the UK economy has started to contract and that GDP fell 0.2% in the June to August period. Other data includes manufacturing and industrial production from the UK and the minutes from the most recent Fed meeting.

Please feel free to contact me (jeremy.cook@worldfirst.com) if you have any questions or thoughts regarding these updates or if you are interested in a particular event in the calendar. If you would like to discuss your foreign exchange requirements, please contact our:Corporate Foreign Exchange Team on 020 7801 9050 or our Private Client Currency Exchange Team on 020 7801 9080. Disclaimer: The above comments are only our views and should not be construed as advice. You should act using your own information and judgement. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgement as of the date of the briefing and are subject to change without notice.Any rates given are “interbank” i.e. for amounts of £5million and thus are not indicative of rates offered by World First for smaller amounts. E&OE. Definitions of jargon/market terms can be found in our Glossary of Foreign Exchange Terms.