Euro Pounds Brief Thursday 15th March 2007

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Thursday 15/03/2007

• Relief rally in the sterling market following sharp downturn
• Chaos in the swissie and yen with carry trade uncertainty
• US dollar looks soft in early trade on uncertainty
• UK employment market shows no signs of overheating pleasing doves
• ECB’s Trichet sees ‘excellent’ anchoring of inflation
• Oil ticks up with a drop in inventories

US Dollar:

Following sharp losses in cable trade yesterday the dollar suffered somewhat in the afternoon session. With
analysts looking to the Fed to think about cutting rates earlier than expected, dollar weakness comes as no
surprise really. With continuing worries about the sub-prime market and the knock-on effects the dollar may
find it difficult to push higher.
This afternoon we see the PPI figure for February which will provide a useful yardstick in gauging the health of
the world’s biggest economy. Annual growth is expected to come in a touch weaker than January. In addition
we also have a raft of less significant data including jobless claims and manufacturing data.

Pound:

Eventually the pound found some support on the US open with sharp rallies against the usual suspects, the
dollar, Euro and yen. Cable looks to have some strong support between 1.91 and 1.92 and this morning looks
fairly stable. Interestingly a fairly hawkish member of the MPC renewed his tenure which also added a little
bid.
Overnight the CBI revised 2007 growth forecasts up by 0.2% and sees a hike to 5.5% and a period of consolidation
there. This morning fixed income markets are under pressure reflecting this news. There is no data due
to be released today in the UK so it’s all eyes on any MPC comments.

Euro:

Again a fairly stable session from the Euro with gains over the yen and soft dollar. Euro-dollar broke 1.32 and
sterling-Euro retraced to the happy medium of mid-1.46.
Last night Trichet spoke about inflation expectations in the Eurozone mentioning that the ECB were as concerned
about deflation as inflation. He did (again) note that monetary policy was still ‘on the accommodative
side’. European CPI data is out today at 1000GMT with no annual change expected.

General News:

• The carry trade merry-go round continues with the yen losing value yesterday. A rally back in the
stock market looks to be the cause this time around. With complete uncertainty regarding the size or
leverage on the carry trades movements are difficult to anticipate.
• Swiss interest rate decision today with a 0.25% hike on the cards.
• The Canadian dollar dropped overnight with capacity utilisation data coming in lower than forecast.
• Oil ticked up in trade yesterday following a fall in inventories ahead of the US summer driving season.
This morning oil is trading $58.51.

Interbank foreign exchange rates:
Updated 15th March
G BRITISH POUND / US DOLLAR 1.9328
GB POUNDS / EURO 1.4625
EURO / US DOLLAR  1.3211
GB POUND / JAPANESE YEN 226.67
GBP/AUD 2.4593
GBP/NZD 2.7925
GBP/ZAR 14.3182
GBP/CHF 2.3543
GBP/CAD 2.2707
GBP/SGD 2.9637
GBP/THB 63.662
GBP/HKD 15.0990