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Hi All,

Here is an update of what’s been happening in the Currency Markets throughout November with the American Dollar (USD).

At the beginning of November, GDP (Gross Domestic Product) for Q3 enabled the US to break out of the worst recession for 70 years as government stimulus helped lift consumer spending and home building. The figure was later revised down towards the end of the month but still, the unexpectedly strong number was the fastest pace of growth since Q3 2007 and broke four quarters of declining activity.

As expected, the Fed kept rates on hold in November. We also saw the pace of decline in Non-farm Payrolls (-190K) continue to slow, with overall Unemployment climbing to a 26½ year high of 10.2% and far worse than market expectations (9.9%). Consumer confidence also disappointed, with Consumer Sentiment (66.0 from 70.6) showing continued concern about job prospects and therefore potentially having a negative effect on retail spending in the forthcoming US holiday season (this accounts for the majority of retailers annual revenue). Consumer spending is vital to the US economy, accounting for over a third of economic activity but encouragingly US retail sales for October leapt to 1.4% against a previous -2.3%. Industrial Production (0.1% m/m) was weaker than expected in October but managed to record its 4th straight monthly increase.

Housing data continued to be indifferent with Housing Starts (0.529m) dropping to the lowest level in 6 months and Building Permits (0.552m) dropping back 4% in October. Further evidence of on-going housing market problems was the fall in mortgage applications that hit a 12-year low even as long term mortgage rates were down at the lowest level for 6 months. However, at the end of the month we saw housing data releases showing the sector is perhaps stabilising with both existing Home Sales (annualised 6.10m) and New Home Sales (annualised 430k) beating market expectations.

Arguably not the biggest shock in ‘the World’, but it was Dubai that stole the headlines at the end of the month as its flagship Dubai World holding company announced that it was entering a six month debt repayment freeze. The USD is considered in the market as a ‘safe haven’ in times of volatility and so with fears of the credit crisis revived, risk aversion took centre stage and the US dollar strengthened across the board. GBP/USD reversed its recent rally and fell from levels above 1.6700 to trade briefly below 1.6300 before recovering.

Current Central Bank Rates:

US (Federal Reserve): 0.25% (Next meeting 15th December)
UK (Bank of England): 0.50% (Next meeting 10th December)

GBP/USD Highs & Lows of November:

High: 1.68755
Low: 1.62604

A movement of: 3.78%

Difference this would make on £200k

High: $337,510
Low: $325,208

A difference of $12,302

Whilst FX isn't the most thrilling of subjects, the sooner you begin to think about your money transfers, the more likely you are to make your money go further.


Jon Sermon
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