Weekly US$ rates and comments - week commencing 8th October 2007

Sterling has had a steady week against the Euro and the US$ but lost ground against the commodity backed currencies of Canada and Australia. The Bank of England met this week and UK interest rates were kept on hold. This was as expected. The trouble with the BOE is that it takes a couple of weeks for the minutes of the meeting to be released which means that we are unsure how the 9 members voted and unclear on how they view the current economic climate. Are they still worried about inflation or are they worried about the economy slowing too quickly? We will have to wait and see. Thankfully there has been no further fall out from Northern Rock Bank.

 

The US$ has hovered around the US$2.04/£1 inter bank level. Relatively good news late last week with US non farm employment figures being above expectations for September. July and August figures were also revised upwards. This is being taken as an indication that a possible US recession is unlikely. However, one of the major problems for the US is that the US deficit is being funded by short term money and as such very susceptible to liquidity problems. The reduced US interest rate has compounded the problem. No respite short term.