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Posted January 12th, 2009 by Charles Purdy

Weekly US$ rates and comments – week commencing 12th January 2009

Sterling gained against most major currencies last week with substantial gains made against the euro. The Bank of England’s (BoE) much expected cut of 0.5%, bringing UK interest rates down to an all-time record low of 1.5% had already been factored in and did nothing to harm sterling’s positive start to the week. It will be interesting to see if sterling can maintain the momentum of this week in the coming weeks. The increasing speculation towards European interest rates being cut by the European Central Bank saw sterling rise approximately by 6% by the time the BoE had announced their cut. So now the onus has shifted to next week’s decision in Europe to see what the trend between sterling/euro might be and whether the effects of the credit crunch in the Eurozone will finally level the playing field for sterling.

 

Important US Non-Farm Payroll figures released on Friday were much as expected but poor enough to have weakened the US$ by more than 4% since markets opened last Monday. Barak Obama also revealed yet another American rescue plan/stimulus package which promises to pump billions of consumers’ and tax-payers’ dollars into failing sectors of the US economy. It was all in the name of “saving consumers and taxpayers billions” of dollars on consumer staples such as energy bills but the continuing irony of state-intervention in US business is seemingly lost on also the president elect as well as with the soon-to-depart incumbent president Bush.

 

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