Euro Pounds Brief Tuesday 27th March 2007

For Today's exchange rates Click the following link:
 

Euro Pounds Home

Tuesday 27/03/2007

• US dollar weakens after a drop in new home sales
• Iran reduces US dollar denominated reserves
• MPC’s Gieve sees UK financial markets on ‘crest of wave’
• German inflation forecasts revised upwards
• German business confidence expected to drop today
• Oil trades near highs on Iran

US Dollar:

A quiet morning session for the greenback yesterday, that was until new home sales showed an unexpected
3.8% drop in February. This figure had more of an effect than usual due to recent worries about the US hous-
ing market and in particular the sub-prime mortgage lenders. The dollar dropped across the board hitting a
10-year low against the Aussie and trading well above 1.33 against the Euro. Amongst other things various
analysts described this figure as ‘bleak’, ‘horrific’, and ‘ugly’.
In addition Iran diversified some of it’s reserves held in US$ due to ongoing political tensions. Today we see
some more housing data and a consumer confidence figure amongst various smaller releases.

Pound:

A solid day for sterling yesterday on the back of the Hometrack housing report. Cable remains in the upper
1.96 region and mid to high-1.47 on the Euro.
Last night the MPC’s John Gieve noted that he sees London financial markets riding the crest of a wave in
terms of low credit risks and soaring profits. He also warned that this growth may exacerbate future problems
for the UK economy in terms of the labour market and the housing market. Gieve may be hinting to the MPC
statement that recent volatility in markets was an added reason to keep rates on hold in March. Next time out
(April 5th) the MPC may well look more closely at fundamentals and be prepared to act.

Euro:

A good performance from the Euro against the dollar yesterday. The Euro jumped sharply on the US housing
data and this prompted strength in other crosses. This morning the Euro remains above 1.33 on the dollar.
Today we have seen German inflation forecasts revised upwards adding pressure on the ECB to raise rates
further and we’re also expecting a drop in German business figures due to the recent instability in the equity
markets.

General News:

• The yen is steadily weakening with carry trade activity however it did take some impetus from the US
weakness yesterday. The Nikkei performance overnight looks poor however this is mostly down to
share dividends as we approach the end of the Japanese financial year.
• The Aussie continues to look strong reaching a 10-year high on the US dollar.
• Carry trade activity is pushing the Kiwi higher too with the cross against the pound looking for 2.70
• Oil continues to trade towards the top of it’s ranges on the ongoing predicament with Iran and their
refusal to comply with the UN. This morning oil is trading $62.70.

Interbank foreign exchange rates:
Updated 27th March
G BRITISH POUND / US DOLLAR 1.9673
GB POUNDS / EURO  1.4760
EURO / US DOLLAR   1.3323
GB POUND / JAPANESE YEN 232.25
GBP/AUD 2.4307
GBP/NZD 2.7396
GBP/ZAR 14.1891
GBP/CHF 2.3917
GBP/CAD 2.2733
GBP/SGD 2.9841
GBP/THB 63.6241
GBP/HKD 15.3672