Euro Pounds Daily brief Thursday 16 November 2006

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Thursday 16/11/2006


• Sterling hits 6-week low against Euro
• FOMC still concerned with inflation
• Dow Jones continues to set records
• Bank of Japan keeps rates on hold
• UK RICS house price balance rises, again
• Oil rallies sharply


US Dollar:


The Fed announced minutes of their October rate setting meeting and highlighted that curbing inflation
was their ‘greatest concern’. Inflation was seen as ‘uncomfortably high’ and that price pressures were
a greater worry to the economy than a slowdown.
This, on top of a strong Empire State report, left the markets in limbo as to whether the next move in
US interest rates would be up or down.


Pound:


Sterling hits 6-week low against the euro as analysts took on board the dovish comments of the Quarterly
Inflation Report. The BoE commented that it saw inflation returning to the target rate of 2.0%
more rapidly than in the August report, having raised rates to 5% last week.
This put more pressure on the pound which was still reeling from labour market data which showed
unemployment hitting a seven year high.


Japanese Yen:


Last night the Bank of Japan left interest rates on hold at 0.25% with governor Toshihiko Fukui reaffirming
that the economy is expected to continue to recover, not ruling out the possibility that rates
may need to rise before the end of the year.


General News:


• The Dow Jones Index continued to set new highs yesterday on the back of the Fed minutes and
strong merger and acquisition activity, posting 12,251.71.
• The Swiss franc took was hit hard in trade yesterday hitting a 6-and-a-half year low against the
euro as Chairman of the Swiss National Bank acknowledged that the safe haven bonus of the
franc had disappeared thanks to the euro.
• The Royal Institute of Chartered Surveyors released their monthly report showing that house
prices had again risen in the UK.
• Oil posted sharp gains as OPEC prepared the market for further production cuts in December.
Noting that there could be an ‘imbalance in supply/demand fundamentals’ oil rallied to $62 per
barrel.


GB POUNDS/US DOLLAR 1.8860
GB POUNDS / EURO 1.4716
EUR/USD 1.2815
GBP/JPY 222.72
GBP/AUD 2.4641
GBP/NZD 2.8503
GBP/ZAR 13.5546
GBP/CHF 2.3532
GBP/CAD 2.1476
GBP/SGD 2.9394
GBP/THB 68.826
GBP/HKD 14.6861

 

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