Weekly US$ rates and comments - week commencing 11th August 2008

Sterling had a quiet start to last week as speculation regarding future monetary policy and the interest rate announcement from the Bank of England on Thursday were the main focus of attention. No great surprises were expected and rates were kept on hold. However, despite more unfavourable data regarding growth and manufacturing the pound kept within its recent trading range against most major currencies, except the US$ which continued to strengthen. That was until Thursday lunchtime and Jean Claude Trichet's statement following the ECB's own announcement on Interest rates.

  

The US$, currently sitting at 1.9240/£1, is back on its feet. And having narrowly avoided falling into recession, the Federal Reserve kept rates on hold last week with the outlook for the American housing market and economy as a whole having brightened considerably. Expectations for a hike in interest rates within the next quarter may be overly optimistic, but having already hit a six month high against the Euro and a one-year-high against the pound last week things are certainly looking up for the US$.