Weekly US$ rates and comments - week commencing 7th January 2008

 

Sterling seems to have no friends.  Has Gordon Brown finally been found out? The UK has both a balance of payment and a budget deficit both of which need to be funded. With UK interest rates falling this is proving to be somewhat difficult and it is very difficult to gauge where the bottom is for sterling against certain currencies, especially the €. Christmas retail sales have been mixed at best, the housing market is suffering and the credit crunch is still of concern. The markets have started to think that UK interest rates may fall by as much as 1% this year. Only a short while ago the market was predicting a reduction of 0.5%.

 

The US$ has been steady over the Christmas and New Year period and sits at US$1.974/£1 inter bank. Similar to the UK the US has significant economic problems to overcome and like the UK, US interest rates are expected to fall. So although the US$ may hold its own against sterling and may even make gains, the US$ is likely to have difficulty against other currencies.