Did sterling have a lucky escape last week? The American private equity firm looking to invest in Bradford and Bingley pulled out citing a downgrade in the B&B's debt as the reason. In stepped the Bank of England to make sure that there was no rerun of Northern Rock. However it reinforces how precarious the finance markets are and that the credit crunch has a long way to run. Mortgage draw downs continue to fall as do house prices and the UK economy could be heading for a recession. Not a pretty picture. The only plus for sterling is that it is not dissimilar elsewhere.
The US$ had a mixed week hitting US$2/£1 towards the start of last week. It now sits at US$1.973/£1 inter bank Strangely the US$ gained ground following an increase in US unemployment. The increase was in line with expectations but at the same time the European Central Bank was making its announcement on € interest rates. The market took more interest in the latter and as such decided to look positively at the US$. However, the problems in the US are still extreme and as such I wouldn't expect any major strengthening for the US$ short term.
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