Euro Pounds Brief Wednesday 28/02/2007

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Wednesday 28/02/2007

• Global markets smashed on China jitters
• Sterling takes brunt of fallout as Europe and US readjust
• ECB’s Stark sees signs of accelerating inflation
• UK house prices rise again
• Exotic currencies suffer on flight to safety
• Oil drops as Chinese markets causes shockwaves

US Dollar:

The US equity market was hit hard yesterday as a 9% drop in the Chinese stock market fed through global
markets. The Dow Jones closed down almost 500 points on the day as the dollar see-sawed between 1.96 and
1.9775. US bonds rallied while the equities underwent distressed selling. Mixed data releases certainly didn’t
help matters with weak housing data being countered by strong consumer confidence. This morning cable is
down 0.5 cents as markets take stock of a confusion filled session in the US markets.
Today we should see some high volatility as we have a raft of data from the US adding to the worries of traders
following erroneous electronic trades last night.

Pound:

The pound looks very soft this morning against the majors despite some bullish data in the housing market.
As with global stocks the FTSE suffered badly yesterday closing down 150 points and this morning it’s off
again another 60 points.
UK house prices rose for a 12th month in a row adding to the BoE’s indecisions in the path of interest rates.
With the inflation outlook easing rapidly the MPC may have to undergo a lot of head scratching in the next
meeting. Consumer confidence is due today however the stock market will be in the driving seat.

Euro:

The euro looks to have been the safest market to have been in yesterday and this morning. The euro held
ground against the pound and the dollar with European stock market holding up more robustly than other
markets.
This morning there is a plethora of small data releases from Europe which should add plenty of volatility.

General News:

• The Chinese stock market dumped yesterday as worries gripped traders that the economy looks to be
slowing and controls may be enforced in the buying of shares. $280 bn was wiped off Asian equities.
• Exotic crosses were hit hard in the flight to safety yesterday and overnight as global stock markets
plunged. As always happens high yield, high risk investments in areas such as South Africa and New
Zealand were quickly liquidated and the money shipped out and back to safe currencies such as the
dollar and the euro.
• Oil dropped below $60 as shockwaves from the equity markets hit oil prices. In addition many funds
cashed out of oil positions to cover margin calls in equity markets. Iran was the only supporting factor
in a sellers market. Oil prints $60.76 this morning.

Interbank foreign exchange rates:
Updated 28th February
G BRITISH POUND / US DOLLAR 1.9543
GB POUNDS / EURO 1.4806
EURO / US DOLLAR 1.3192
GB POUND / JAPANESE YEN 231.41
GBP/AUD 2.4814
GBP/NZD 2.7921
GBP/ZAR 14.1482
GBP/CHF 2.3893
GBP/CAD 2.2798
GBP/SGD 2.9874
GBP/THB 66.468
GBP/HKD 15.2596