Weekly US$ rates and comments - week commencing 20th April 2009

The equity rally which started in the previous weeks trading continued last week and helped sterling extend its recent gains against most major currencies. Though sterling's value on the markets is still mainly influenced by risk-appetite/aversion, increased confidence in the UK and global financial sector has clearly helped. This week we have the budget to look forward to. Not sure what the Chancellor can do apart from starting the process to reduce public expenditure. We also have a raft of economic data released this week; inflation data on Tuesday, employment data on Wednesday and retails sales on Friday. So by the end of the week we will have a clearer picture as to how the UK economy is progressing and if there are any "green shoots" of recovery and if the outlook for sterling is any the brighter.

 

The Federal Reserve's Beige Book, which reports on overall US economic conditions every 6 weeks, noted a further contraction in the US economy with the most alarming figures coming from the industrial and labour markets. However, with this said, the sway of economic data still pales against the weight of the risk-averse investors and their demand for the US$ as a safe-haven asset and as such it sits at US$1.470/£1. Much like with UK data, the figures from the US are far from positive but marginally less negative than in previous weeks. Any clue to having already reached the bottom of the market would be a welcome boost.