Weekly US$ rates and comments - week commencing 24th August 2009

With few significant economic data releases during last week and a tentative air in the markets at present sterling merely continued in its downward trajectory, making marginal losses against most major currencies. However, a slight increase in risk-appetite and business confidence globally led to gains against the US$ as investors fled their safe-haven assets. The main focus of the economic week for the UK was this month’s Bank of England’s meeting minutes released on Wednesday. In the report we learnt that Mervin King (the Bank’s governor) and two of the other eight members’ wishes to immediately expand the ‘asset purchase scheme’ and inject further liquidity into the UK economy. This news instantly devalued sterling on the markets and added speculation that the governor’s plans may well be supported by additional members next month as all have supported the notion. This week will see second quarter UK GDP figures, another major indicator for the current health of the UK economy.

 

The US$, currently at $1.647/£1, made broad losses against almost all major currencies last week as global risk appetite grew and investors sold-off their low-yield and low risk assets. With many of the nations hit by the ‘credit crunch’ in the last two years now seeing faintly positive, if inconsistent, productivity data the anticipation of the end of the global recession has generated enough confidence to see a sharp rise in commodity indices and a brightened outlook for business.