Weekly US$ rates and comments - week commencing 18th May 2009

Even though the Bank of England pulled no punches on Wednesday of last week in describing how difficult the next 18 months were going to be and that the UK economy was far from being out of the wood, sterling gained against most currencies during the course of the last week. Sterling gained support from better than expected retails sales for April, better than expected manufacturing output for March and a UK housing market survey that came in stronger than expected. However, it is still difficult to know how the government is going to fund their massive debts over the coming year(s) especially given the increase in taxes announced in the last budget which seemed to be counter productive in encouraging inward investment and as such I would suggest looking at any strength in sterling as a buying opportunity rather than the start of a prolonged move up. On Tuesday of this week we get inflation figures which I am sure will make interesting reading. Otherwise a quiet week for economic data.

 

The US$ is hovering around the US$1.515/£1 mark. The US$ had a mixed last week benefiting rather perversely from poor US retail figures and export figures which in theory encourages the buying of US$'s on safe haven status. All very strange to think of the US$ as a safe haven but people do probably because the rest of the world holds so many of them and can't afford for them to depreciate too far. The stock markets have made great gains over the last two months and as such the market expects a pull back which may well make the US$ more attractive. The Fed presents a range of economic forecasts on Wednesday which will detail there expectations for growth [or the lack of it] and employment over the coming year to 18 months.