Weekly US$ Rate and Comments - week commencing 1st October 2007

 

No major negative news last week to hurt sterling. In fact the Bank of England made £10bn available in short term funding and there were no takers. However the sight of queues outside of a British bank with savers desperately trying to get their money out has not inspired confidence. All in all a major mess created by the BOE and the Government. The BOE meets this week and we wait to see if they hold firm on interest rates or follow the example of the Fed and cut interest rates. The market expects them to hold firm. It will take a while for sterling to make a significant recovery especially against currencies such as the Euro. It certainly seems a good time to bring funds back to the UK.

 

The US$ is under significant pressure continuing to hit all time lows against the Euro. Against sterling the US$ has weakened to US$2.047/£1 inter bank. In the US housing sales have collapsed. Recession seems more than a possibility. Really difficult to find anything positive as the economic problems the US faces are very significant and their balance of payment deficit is becoming more difficult to fund with long term funds. So I see no respite for the US$ in the short or medium term.