Weekly US$ rates and comments - week commencing 24th November 2008

Sterling edged up through last week away from the record lows of the previous. The shock of reaching such a low level against the euro which many had considered as inconceivable has forced a re-think of how much further down sterling could fall with further interest rate cuts becoming more of a certainty as inflation continues to fall. However, the consequence of such cut may be further devaluation of sterling on the markets and is something the Bank of England would want to avoid but may have to live with short-term.

 

The US$, currently at 1.492/£1, maintained its position at the top of the currency pile last week. Poor economic data and media speculation regarding the end of the US reign of market dominance in the coming era did little to affect the US$, which is still benefiting from the 'flight-to-quality' phenomena – a shift towards low-risk assets and currencies. This concept of the US$ being the most reliable asset in the current market is surely much more testament to the poor state of affairs across all major global economies and currencies than a true sign that conditions are safest in the US economy.