Euro Pounds Brief Monday 15 December 2007

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Monday 15/01/2007

• Sterling continues to strengthen on rate hike
• Weekend press blames inflation; more hikes anticipated
• US Retail sales firmer in holiday season
• The euro displaces the dollar in bond markets
• US holiday celebrating Martin Luther King Day
• Oil off lows as OPEC threaten production cuts

US Dollar:

US Retail Sales data came out stronger than expected on Friday afternoon as consumers spent heavily
over the holiday period, with electronic equipment being the good of choice. The figure underlines the
Fed’s belief that the economy in the US will continue to grow despite the slowdown in the housing market.
The Fed’s Mineham noted that ‘inflation pressures should ease this year’.
Despite this bullish data the dollar failed to make headway against a surging pound however the greenback
continues to do well against the euro following last weeks decision to keep rates on hold.

Pound:

The pound looks strong again this morning following the rate hike which caught UK investors by surprise.
Mixed opinion in the weekend press as to the reasoning behind the move and the future path of
interest rates. Roger Bootle of Capital Economics cites money supply/asset prices and inflation and
rates 6% by year end as ‘not a silly number’, while David Smith of the Times looks to inflation and
thinks that one more move will be enough and global outlook will put a lid on UK interest.
All eyes will be on tomorrow’s CPI data which is rumoured to have been the ‘straw that broke the camels
back’ for the MPC’s decision to raise rates last week. CPI is likely to have been 3%+ which would
require BoE Governor King to write to Gordon Brown with the reasons for the high figure.

Euro:

The euro has displaced the dollar in international bond markets in terms of currency denomination as
debt-laden European governments issue bonds to finance the debt.
The euro continues to struggle to gain ground after last weeks tame action by the ECB.

General News:

• Markets look to be leaning towards a hike in January for the Japanese economy following fairly
bullish data from the far East.
• Today Venezuelan President Hugo Chavez is expected to nationalise the country’s energy sector
which may have an effect on oil prices.
• Oil bounced back above $53 on expectations OPEC will cut production to halt the crude price
slide. Current trade sees oil at $53.25.

Interbank
Updated 15th January
GB POUNDS / US DOLLAR 1.9628
GB POUND / EURO 1.5161
EURO / US DOLLAR 1.2941
GBP/JPY 236.09
GBP/AUD 2.4967
GBP/NZD 2.8254
GBP/ZAR 14.1270
GBP/CHF 2.4451
GBP/CAD 2.2911
GBP/SGD 3.0256
GBP/THB 70.500
GBP/HKD 15.3022