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Posted November 10th, 2008 by Charles Purdy

Weekly US$ rates and comments – week commencing 10th November 2008

The Bank of England’s move to slash interest rates in the UK last week from 4.5% to 3% was surprisingly well received by the markets and it is hoped the decision will shock the flagging UK economy back into life. Despite rates being at their lowest for 53 years, there were suggestions following the announcement that further cuts may be on the cards in the early part of the new-year. Much of this speculation is owing to the fear of inflation coming in under the Bank of England’s targeted 2% in the coming months. However despite the news of the aggressive cut in rates being seen as a positive move for the UK economy, sterling fell to new record lows against the euro on Friday morning and closed the week marginally lower against the US$.

 

The economy was sited as the main factor behind how the US electorate voted last week, according to exit polls. So having made history by electing Barack Obama as the new ‘leader of the free world’ the pressure from the American public will undoubtedly mount for the new president elect for a clear plan of action for steering the US out of the financial crisis. A slight shift to the left politically in a time where de-regulation has been largely blamed for the global economic crisis should be something as a positive for Senator Obama. However, consistently grim US market data and low consumer confidence will test the performance of the US$, currently at 1.578/£1, which has drawn so much strength from the investors seeking risk aversion and for having to return funds home.

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