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The FTSE is down around 1%, but the real loser today is UK PLC. The pound is crashing as various factors come to a head. Up until July, the US Dollar was the currency the world loved to hate, now it’s sterling’s turn to be punished. Today’s Bank Of England inflation report was more dovish than expected, opening the doors to possible interest rate cuts before the year is out. This coupled with a housing market that has fallen through the roof has pushed Sterling down 1.11% against the Euro, 1.3% against the Dollar and 1.84% against the Yen today alone.

Stocks are not immune from the general stampede out UK securities. The financial sector is once again under pressure and without the FTSE’s other major sector firing on all cylinders (oil), the index is showing weakness where it counts. It has recently been reported that global bank’s losses & writedowns from the credit crunch have exceeded the $500bn marker. To add to the gloom, New York University economist Nouriel Roubini has recently estimated that this figure could double before the crisis is over.

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The FTSE is currently indicating a weaker open as traders are waiting for the release of the UK employment numbers. Some analysts are expecting for an increase in the unemployment rate, which will give more reason for the BOE to cut the interest rate at the next meeting. We feel that the unemployment rate will be even worse then expected, and if it happens look for the FTSE to open almost 1% weaker.

Oil broke through the 115 dollar support level, on speculation that a U.S. government report today will show refiners cut output, signalling a drop in demand in the world's largest energy consumer, a build-up in the US inventory could push oil below 110 dollars per barrel. Gold is trading just above the 800 dollar level, and it seems like its going to go lower, as the US dollar is picking up steam against the other currencies. We will not be surprised if gold drops below 800 based on positive US dollar sentiment.

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