Weekly US Dollar Rates and Comments - 6th August 2007

The Bank of England held UK interest rates at last weeks meeting. This was no surprise given the BOE increased rates at the previous meeting, the significant volatility in the equity markets and the major floods in certain parts of the UK in the last month or so. Sterling is still holding its own and the market still expects that we will see at least one further increase in UK interest rates by Christmas.

 

The US$, currently US$2.038/£1 inter bank, has enjoyed [if that is the right word] a period of stability holding its own around the 2.03/04 level. The problems with the sub prime loans are beginning to reach far and wide. Equity markets have been rattled. Private equity buy outs are finding the credit markets very difficult. Loans are either very expensive or impossible to put in place. Strangely this has been of benefit to the US$ as it has meant a flight to safety. Not quite sure why the US$ is included but some people seem to be able to "gloss over" the US balance of payment and budget deficits. I still believe that the US$ is going to be under pressure for a while yet.