Weekly US$ rates and comments – week commencing 11th May 2009

At the start of last week sterling strengthened marginally against most currencies thanks to the improved confidence in the financial sector and renewed risk-appetite. The Bank of England (BoE) met on Thursday and despite rates being kept on hold at 0.5% as expected, sterling's recent gains, especially against the €, unwound within just a couple of hours. This was due to the announcement to increase the level of quantitative easing by £50bn from the current level of £75bn. This week we have on Tuesday the release UK manufacturing data and UK trade data for March. Then on Wednesday we have both the unemployment figures for April and the release of the updated growth and inflation figures from the BoE. So a busy week for UK data and we wait to see if there are any "green shoots" to support sterling and perhaps even push it to higher levels.

 

 

The US$ sits at US$1.520/£1 inter bank as I write. The results of the stress tests on US banks were released on Thursday of last week but did not surprise [especially as they had been leaked over the previous weekend] with the US banks needing to add $74bn in capital by November of this year. Risk appetite being on the up has generally taken away from the US$ of late and this trend continued with the US$ hitting a one month low against the euro. The Federal Reserve chairman, Ben Bernanke, is also adopting a 'cautiously optimistic' approach when discussing the future of the US economy and said that he expects an upturn by the end of this year. The non-farm payroll data released on Friday supported this notion with a better-than expected result in the keenly watched unemployment figures. This week we have the US trade data for March out on Tuesday and on Wednesday we have US retail sales data for April. So as with sterling some significant data to see how the US economy is performing.