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Pounds Dollars Currency News Archives

Wednesday 29th August 2007 Interbank
G BRITISH POUND / US DOLLAR 2.0019

Fed did discuss eroding financial conditions; inflation still risk

US Dollar:
Mixed signals from the Fed last night as the minutes of the August meeting showed that the Fed did discuss eroding financial conditions and the possible need to act in the future. Of course this was not long before the wild swings in the market caused the Fed to cut discount rates. The Fed did maintain their anti-inflationary stance however the tone was slightly more neutral than previous minutes. They did say a ‘deeper and more prolonged’ housing downturn was possible. Analysts have recently bandied a 10% drop in US house prices.
The dollar is fairly well-bid coming into month end as funds exit carry-trade backed stock investments and head towards the usual safe-haven of US Treasuries. Treasury prices have also rallied on demand and news that Cheyne Finance, a hedge fund, had it’s ratings cut by S&P thanks to investments in European and US debt. Not a great deal of data or speakers today from the US.

Dollar posts gains on surprisingly strong data

US Dollar:
On Friday slightly stronger data did managed to shock markets with Durable Goods coming in above expectations.
The September Fed Fund rate has a full 0.25% cut priced in fully now so it looks like the Fed cutting is a done deal in order to protect the future of the economy.
Data showed that more people in the US are defaulting on credit card payments than in 2006 which is no surprise given the rise in headline rates.
Yesterday Existing Home Sales fell to a 5-year low with the number of unsold properties jumping to the highest
level since 1991.
This morning cable is around the mid-2.00 level ahead of the Fed’s August minutes due this evening. The recent squeeze in markets was after the meeting so no surprises expected.

Friday 24th August 2007 Interbank 
G BRITISH POUND / US DOLLAR 1.9956

Dollar continues to give back some of its gains

US Dollar:
The USD came under pressure yesterday after a statement by Country Financial CEO raised concerns that a recession may be coming in the US economy. With the markets already jumpy, the dollar weakened off against a basket of currencies. Against the Euro it was 1.3565, against the pound it moved well above the $2 mark. While confidence is returning, investors remain concerned about the possible spill over from the sub prime crisis. Sentiment was rattled late in the day by reports from Countrywide’s CEO that he saw the downturn in housing activity leading to a US recession and markets are likely to be looking to this afternoon’s new home sales data for clues on the state of the housing sector. Figures out today will be the Durable goods due at 1.30pm UK time, previous 1.3% and expected 1.0% New Home Sales are due out at 15.00 UK time and previous were 834k and expected to be 825K. £1 buys approx $2

Monday 20th August 2007

Sterling strengthens moderately against the dollar
US Dollar:
Forex markets did an about turn on Friday, surprised by the Fed’s announcement that it was cutting the discount rate by 0.50% to 5.75% with immediate effect. While the Fed funds rate was left on hold speculation about a move in September continued to build. Thus, the dollar came under some pressure, while high yielders picked up some ground. However, markets remain vulnerable to the unwinding of carry trades as they wait to see if the Fed’s emergency cut will help settle nerves over the turmoil in credit markets

Spanish mortgage - IMS Mortgage Spain

Tueday 14th August 2007 Interbank
G BRITISH POUND / US DOLLAR 2.0256

Dollar rallies on firmer retails sales

US Dollar:

The dollar rallied again yesterday after strong demand in the morning session and stronger than expected US Retail Sales. Cable traded down from the 2.02 level touching a low of 2.0082 in the morning session and against the euro traded down to 1.3599.
All of the liquidity added to the market by the Fed has now been removed after the initial shock on Friday.
After the calls for an immediate rate cut on Friday the market is now wanting to see better inflation numbers before the Fed decide to reduce the cost of borrowing.
This morning cable is sitting just above 2.01 and euro-dollar just above 1.36. Plenty of data to get stuck into today with the US Trade deficit set to increase by about $1bn for June and PPI set to rise by about 0.2%.
Later on this evening we have ABC Consumer Confidence.

Monday 13th August 2007 Interbank
G BRITISH POUND / US DOLLAR 2.0242
Global stock markets hammered on growth worries
US Dollar:
The dollar stayed pretty well supported on Friday following major losses on the stock market. As per usual investors fleeing from riskier investments in non-US stock markets cashed up and bought the dollar in a flight-to-safety.
There were some rumours on Friday that the Fed may be forced to come out and cut rates before the next scheduled meeting. These were not denied by the Fed but this would be an unprecedented move and would cause shockwaves in the market. The Fed did follow the ECB’s lead by adding further liquidity into the money markets in an effort to stop money shortages.
US Retail Sales this afternoon head the data releases but again eyes may be on the bigger picture of growth and just how large the losses from the sub-prime mortgage market are.

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