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Posted November 10th, 2007 by Charles Purdy

Weekly US$ rates and comments – week commencing 12th November 2007


Sterling had a mixed week losing ground against the Euro but gaining against other currencies such as the US$ and the high interest rate currencies such as the Australian $. The Bank of England kept UK interest rates on hold which was expected and we now wait for the minutes of the meeting to see what the emphasis of the meeting was and how close the vote was for keeping or reducing UK interest rates. UK data including house prices and trade figures were on the weak side and as such were a driver in the fall of sterling against the Euro. A lot of UK economic information out this coming week which will make interesting reading with regards to inflation as this will be a significant driver for UK interest rates.


The US$ continues to be under pressure and sits at US$2.090/£1 inter bank. The balance of payments deficit reduced for the first time in a long while which indicates the weaker US$ is increasing US exports. However, this “good” news was overwhelmed by the continued market nervousness with regard to further fallout from the credit crunch. The US economy is also slowing and growth [if any] is being downgraded for next year. Not a great situation for the US$ and there seems to a total loss of faith. We even touched US$2.11/£1 last week. There may be short term gains for the US$ as rapid movements tend to see pull backs but the trend is one way and that is for US$ weakening.

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