- 1.348 / £, compared with 1.34 last week
- US dollar
- 1.982/ £, compared with 1.961 last week
- Canadian dollar
- 1.998 / £, compared with 2.011 last week
- Australian dollar
- 2.242/ £, compared with 2.220 last week
- New Zealand dollar
- 2.565 / £, compared with 2.567 last week
- Swiss Franc
- 2.173 / £, compared with 2.161 last week
- South African Rand
- 14.086 / £, compared with 13.843 last week
Charles’s Thoughts: Sterling continues to gather friends. Not enough friends for a party but a great improvement when compared to two weeks ago. The minutes of the last Bank of England meeting were announced and showed that the BOE was still focussed on combating inflation and a key control is UK interest rates. The market still expects UK interest rates to be reduced but one suspects that unless something like a new Northern Rock happens the cuts will be made in 0.25% steps over a period and in a considered manner. Otherwise UK news was dominated by news from elsewhere. So given the uncertainty either way I would suggest that to buy or sell euros makes sense so as to be very sure of what your costs are or what you are getting.
The US$ had an entertaining week. The Fed Chief surprised the market on Tuesday by reducing US interest rates by 0.75%. This had been “expected/hoped for” by the market given the need to stave off recession in the US. More cuts in US interest rates are expected and I wonder if in order to avoid falling into recession US interest rates will need to head back to 1%.
The Euro lost a bit of ground this week. Not a huge surprise given the news of the week was a Paris based trader managing to lose Euro 5 billion. How on earth can you manage to do such a thing? It appears with not much difficulty and it doesn’t take much time. We live in a very strange world when such things can happen! Euro land finance ministers want the European Central Bank to focus on the economy [reduce Euro interest rates] but the ECB continues to focus on inflation [maintain Euro interest rates].
Sterling held its ground against the higher yielding currencies. Not really a surprise given the reluctance of investors to take on higher risk in these very volatile markets. I suspect there is more upside for sterling than downside against most of these higher yielding currencies.
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