Weekly US$ rates and comments – week commencing 28th July 2008

The pound threatened to buck the recent trend and pushed for month-high prices against most major currencies early last week. In their published MPC meeting minutes, the Bank of England showed in that although the majority of the members voted to keep rates on hold, there was a three-way split for only the second time since the start of its independence in 1997.

The pound ended the week on the back foot and with more poor economic data strengthening the case for a cut in rates the downside risk for sterling could well be greater than the upside potential in the short term.

The US$, currently at 1.985/£1 inter bank, had an indifferent week as it sought to regain its losses from last week’s news on the giant mortgage lenders Fannie Mae and Freddy Mac. The dollar faltered on Thursday morning with the release of weekly U.S. jobless claims data, which rose to match a three-year high.

However, the dollar remained stronger last week versus the Euro, supported by gloomy reports from outside the U.S. on the global situation, recent hawkish comments from the Federal Reserve, and greater confidence that U.S. officials will prop up the faltering housing market.