Weekly US$ rates and comments - week commencing 3rd November 2008

Sterling rose steadily against the euro throughout a relatively quiet week for market data. Closing last week only marginally up against the US$ despite another period of high price volatility the sterling to US$ rate moved in a huge range over the last five days of around 8%. The reductions in LIBOR (inter-bank lending rates), which were significantly reduced over previous weeks, were intended to bring more stability to the markets and ease conditions for the money lenders. However, the aftermath of the last few months in the credit crisis are leaving investors and business confidence still very much at a low. This week's decision on interest rates from the Bank of will provide a shock only if rates are not cut, with many expecting a further half a percent off to follow last month's emergency cut of the same value.

 

The US$, currently at 1.6180/£1, fell midweek against both sterling and the euro following the Federal Reserve's meeting last Wednesday where they cut interest rates by half a percent to just 1%. Still benefiting from being viewed again as a safe-haven asset, the US$ along with the Japanese yen have maintained strength, more for the lack of safe bets elsewhere. In fact, with consumer confidence at its lowest levels in America for more than 40 years and weaker than expected GDP data released this week, the dollar did not perhaps weaken as much as it would or should have in 'standard' market conditions.