Euro Pounds Brief Wednesday 14th March 2007

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Wednesday 14/03/2007

• The pound starts the morning on the back foot thanks to yen pressure
• US subprime mortgage worries lead global downturn
• US retail sales weaker than expected
• Carry trade continues to unwind as Asia gets hit
• Nikkei finishes off 3%
• Oil comes under pressure as global stocks lose ground

US Dollar:

Poor retails sales data in the US caused a spike in cable mid-session yesterday as consumer spending came in
below forecasts showing the US economy may be less likely to be able to cope with any downturn. On top of
this data subprime mortgage worries are dragging heavily on the US with reports that the second largest subprime
lender, New Century Financial Corp may be on the verge of collapse. The effect of a downturn in the
subprime market should not be underestimated, this could prompt US rate cuts, or at least early speculation.
This afternoon US trade data is released and it is expected to show a narrowing in the trade deficit which
would be a welcome move with the trade gap running at such a wide level.

Pound:

Sterling tracked down for the majority of yesterday and has come under renewed pressure from Russian sellers
this morning driving the pound down against the dollar, Euro and yen. Cable pushed up yesterday following
the US data but gains were quickly pared as sellers continued to do what they do best. The most logical
explanation for the continuing pressure seems to be further carry trade unwind as risk profiles grow thanks to
the US subprime scares.
Employment data is due out at 0930 which may put a base under the falling pound however not much notice
appears to have been taken to fundamentals in this move down.

Euro:

The Euro remained fairly resilient yesterday and overnight climbing against both the pound and the dollar.
European bourses have come under pressure with the falling global equity markets however the Euro seems
to be underpinned by the more hawkish tone of the ECB.
A whole host of European employment and industrial data, along with national inflation data is due out
throughout the morning so we should see a fairly choppy session for the Euro.

General News:

• More losses in the Japanese stock market as subprime worries and indications that the worlds largest
economy may be slowing down. The index finished trading down almost 3%.
• More strong Aussie confidence data pushed sterling-aussie down to the 2.45 are in trade yesterday.
• The South African rand came under pressure as investors sell out of high yield assets as the appetite
for risk falls.
• Oil traded down as global stocks came under pressure and OPEC showed no signs of altering output.
Oil dropped to a current price of $58.14.

Interbank foreign exchange rates:
Updated 14th March
G BRITISH POUND / US DOLLAR 1.9235
GB POUNDS / EURO 1.4579
EURO / US DOLLAR  1.3192
GB POUND / JAPANESE YEN 223.14
GBP/AUD 2.4613
GBP/NZD 2.8030
GBP/ZAR 14.4155
GBP/CHF 2.3388
GBP/CAD 2.2556
GBP/SGD 2.9512
GBP/THB 63.430
GBP/HKD 15.0289