Euro Pounds Brief Monday 4th December 2006


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Monday 4/12/2006

• Pound approaches $2 level
• Bank of England set to keep rates on hold this week
• ECB expected to raise rates this week
• US Manufacturing shows signs of slowdown
• Reports of explosions in North Korea hit Asia
• Oil holds on to gains as first big snow hits US

US Dollar:


 Fears that the slowdown in US housing has spread to manufacturing kept an already weak dollar under
continued pressure. The US ISM data on Friday showed a contraction in the factory sector for the first
time in three and a half years.
It seems that the Fed is battling against the market as Fed speakers continue with hawkish tones, despite
the US futures markets pricing in three quarter-point rate cuts by the end of 2007.
With no data due from the US today the FX market will be fundamentals driven.

Pound:


 Sterling is in sight of the $2 level after continued UK strength and shrinking yield gap between the two
countries. The MPC meet this week to vote on interest rates. No move is expected, however the
shadow MPC voted 7-2 to keep rates on hold, one of the dissenters, Roger Bootle, being the most dovish
of doves.

Euro:


 Another good session for the Euro against the dollar and the yen. With the ECB widely expected to
raise rates this week the Euro zone currency is expected to continue on its upward trend.
ECB member Liikanen said at a conference that ‘the economic upturn in the Euro zone will continue next
year albeit with a somewhat slower tempo’.

General News:


 • Reports of an explosion in North Korea knocked Asia overnight as continuing tension over North
Korea’s nuclear policy comes back into the markets.
• Falling dollar prices helped gold continue to stay strong and drag silver prices to 6 month highs.
• Oil stayed above $63 as the first major winter snow storm hit the US and the OPEC governor
said on Sunday that the oil cartel needed to cut production further because of a slowdown in
world economic growth and rising oil stocks.

Inter-bank
Updated 04/12/2006
 
GB POUNDS / US DOLLAR 1.9752
GB POUND / EURO 1.4852
EUR/USD 1.3297
GBP/JPY 228.34
GBP/AUD 2.5137
GBP/NZD 2.8690
GBP/ZAR 14.0969
GBP/CHF 2.3632
GBP/CAD 2.2571
GBP/SGD 3.0539
GBP/THB 70.919
GBP/HKD 15.3670
 

 

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