Euro Pounds Brief Monday 19th March 2007

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Monday 19/03/2007

• US Dollar falls sharply but recovers in late trade
• US inflation picks up as expected
• UK house prices jump yet again in March
• Japanese yen under pressure as Fukui reiterates slow policy
• China raises interest rates to slow export inflation
• Oil underpinned by Nigeria supply worries

US Dollar:

The dollar came under heavy pressure during morning trading ahead of the CPI data from the US. Cable
peaked at a touch over 1.95 and Euro-dollar managed just shy of 1.3350. CPI was expected to show an increase
of 0.2%, which it did, however position-covering looked to be the main market driver.
This week the Fed meet to decide on interest rates with no move expected. Fed officials are still very wary of
the risks posed by inflation following data last week even when the US economy looks to be moderating. One
newswire interestingly writes that the Fed not cutting now may lead to larger cuts later in 2007 to stimulate
growth. A minor housing figure is the only US data release due today.

Pound:

The pound rallied nicely on Friday morning with some fairly large buying in cable which saw the pound rally
against the Euro too. The pound managed to break 1.46 before paring gains in the afternoon. The pound
looks strong again this morning following yet more bullish data from UK property website Rightmove. National
prices were up 12.2% year-on-year with London seen as the main driver as bankers and foreign investors
snap up capital property. London’s average house price now stands at £366,302 and stayed on the market for
65 days. On the flip side of this UK lenders have cut the price of fixed rate mortgages prompting speculation
that rates are nearing their peak.
This week Chancellor Gordon Brown makes his budget statement with Brown expected to report a ‘rosy affair’
in the UK economy.

Euro:

European markets looked strong again with German growth being talked up again and again. This with general
hawkishness from ECB members and a general re-buying of risk looks to be keeping the Euro firmly
rooted. With no data releases due today the market should be dominated by Asian action.

General News:

• Japanese stocks rallied overnight and the yen fell as BOJ Governor Fukui reiterated that rates will not
be raised at any great pace. In addition the general appetite for risk looks to be returning following the
turbulence in the equity and credit markets.
• The Peoples Bank of China (PBOC) raised interest rates on Saturday by 27 basis points in an effort to
control rising inflation by making the Yuan more expensive for export clients. There doesn’t seem to be
any major fallout on the majors after a brief blip caused by reactionary buying/selling from automated
trade systems.
• Oil stayed a touch below $60 being underpinned by Nigerian supply worries and escalating violence in
the Middle East. Oil trades $59.94.

Interbank foreign exchange rates:
Updated 19th March
G BRITISH POUND / US DOLLAR 1.9426
GB POUNDS / EURO 1.4600
EURO / US DOLLAR   1.3305
GB POUND / JAPANESE YEN 227.62
GBP/AUD 2.4420
GBP/NZD 2.7804
GBP/ZAR 14.4280
GBP/CHF 2.3478
GBP/CAD 2.2867
GBP/SGD 2.9625
GBP/THB 63.725
GBP/HKD 15.1719