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Hi All,

As promised here’s a brief update on what’s been happening with the US Dollar over the last week.

For most of the week, GBP/USD gave the misleading impression that Sterling was holding up well in the face of potentially negative news for the UK economy. In fact Sterling was wilting fast against the Euro and owed its stability against the Dollar to the latter’s continued weakness in response to global stock market and commodity gains. It was only on Friday that the significant decline in GBP/EUR was reflected in GBP/USD, as it slumped 2 cents to 1.6250. Mervyn King and his cautious band of followers sparked this latest bout of Sterling bashing, testifying to the Treasury Select Committee that there would only be a slow and protracted recovery and that “growth rates didn’t tell the full story”. He reiterated that deflation was their main concern and that unemployment would continue to rise even as low levels of growth returned. Perhaps even more significantly, King suggested they were looking at lowering the interest rates on bank’s deposits with the BoE (Bank of England). This would be another escalation of the easing programme since the measure is a disincentive to leave funds idle with the Central Bank. The aim being to stimulate fresh lending to the economy instead. On these comments Sterling fell.

On the hard data, unemployment rose from 7.8% to 7.9% and retail sales disappointed by failing to rise in August. The first positive reading for the forward looking RICS (Royal Institution of Chartered Surveyors) housing data for 2 years was lost in the gloom and a further collapse of £15 billion in net lending to businesses and a record public sector debt for August at £16 billion, ensured that Sterling would end the week firmly under the cosh.

US data and comments from Bernanke encouraged the US and global stock market gains with a healthy 2.7% rise in retail sales (mostly due to the ‘cash for clunkers’ car scrapping scheme), a second consecutive rise in industrial production and further bounces in the leading indicators in the US housing market (starts and permits). The Fed Chairman said that the recession is very likely over.

GBP/USD movement – High’s & Low’s of last week (14/09/09 – 18/09/09)

High’s: 1.6697
Low’s: 1.6231

A movement of: 2.87%

Difference on £200k

High: $333,940
Low: $324,620

Difference of: $9,320

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.

A further update will be added next week.

Regards




Jon Sermon
HiFX
 
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