Weekly US$ rates and comments - week commencing 27th April 2009

Sterling suffered a rather poor week on the markets thanks to an array of poor data and publications released throughout last week. Improvements from the prior week's trading which had seen sterling hit multi-week-highs against the euro and US$ unwound gradually as confidence in the pound dwindled. Last Wednesday's budget announcement from the Chancellor, the release of the Bank of England meeting minutes and jobless figures for March combined to weaken sterling with weaker-than-expected UK GDP data compounding the losses on Friday. We also learnt last week the level of UK government debt we as a nation will be taking on over the next few years. The figures are based on what some say are over-optimistic predictions and therefore could well be substantially worse than forecast. Despite the poor news and data sterling performance showed a level of resilience not seen in previous months and this should be as a positive for the medium term.  On Friday we see the release of data released on UK manufacturing and mortgage approvals. Improvements are expected in both with the former helped by new orders and sterling weakness.

 

The US$, which sits at US$1.454/£1, is still as much at the whim of the risk-appetite/aversion phenomena now as it was when the 'flight to quality started' in August last year. This holding of the US$ as a safe-haven asset has maintained despite the efforts of many governments around the world to stabilise their respective currencies by conventional or unconventional monetary policy. There was little other major US economic data from last week beyond Friday's Durable Goods Orders and although better-than-expected there seems to be very little upside to the US$ now and it may have already reached the peak of its powers. On Wednesday  the Fed meets and is expected to keep interest rates on hold. What will be of interest will be their view and assessment on the economic outlook.