Euro Pounds Brief Thursday 29th March 2007

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Thursday 29/03/2007

• Bernanke makes the Fed’s position abundantly clear
• Dollar rises albeit briefly on Bernanke testimony
• French presidential candidate wants to cause a drop in the euro
• ECB’s Trichet warns on inflation
• South African rand loses significant ground on fading risk appetite
• Oil spikes to a high of $68 on rumours of Iran attack on US Navy

US Dollar:

The markets were waiting for Fed chairman Ben Bernanke’s testimony to gauge his policy stance and he duly
delivered. He said that inflation remains ‘uncomfortably high’ showing the Fed are unlikely to stray from their
inflation-watching policy. He did however see that the risks to the US economy have grown in certain sectors
but it looks unlikely the Fed will do anything to rates in the near future. The dollar initially rose on these comments
testing 1.96 on cable but failing to push on through. Euro-dollar is till supported at 1.33.
Plenty of data out to digest today including GDP data which is expected unchanged and weekly employment
figures amongst other things.

Pound:

Very little in the sterling market yesterday as traders took time to digest the speech to the Treasury Select
Committee on Tuesday from MPC members. Very similar trading patterns for the pound against the dollar and
the Euro with most movement coming on the back of Bernanke’s testimony.
This morning sterling has opened a touch stronger in the mid-1.96 range in cable and well bid against the
Euro in mid-1.47’s. At 0930 BST we have money supply data which is one thing that has been worrying certain
MPC members in recent weeks. We are looking for slightly weaker figures.

Euro:

Despite constant ECB warnings from both Axel Weber and President Jean-Claude Trichet the Euro looks a little
weaker this morning. Weber is worried about oil prices, money supply and a German upturn whilst Trichet
mentioned upside risks in relation to money supply.
Interestingly French presidential candidate Nicolas Sarkozy urged other European nations to put pressure
on the ECB to weaken the Euro to stop the exchange rate hurting exporters. This looks like part of the

General News:

• The ongoing situation with Iran and the 15 UK sailors is still worrying markets but the situation looks
to be easing slightly. Iran have directly contravened the Geneva Convention by televising it’s captives.
• The New Zealand trade deficit narrowed overnight however Finance Minister Cullen did comment that
the deficit was too high at 9% of GDP.
• The South African rand fell sharply yesterday on risk unwinds hitting a low against sterling of just over
14.50.
• Oil held near its highest close in over 6 months on the back of the Iranian crisis as worries grew of
supply issues from the Gulf. This morning oil is trading $63.89.

Interbank foreign exchange rates:
Updated 29th March
G BRITISH POUND / US DOLLAR 1.9646
GB POUNDS / EURO  1.4745
EURO / US DOLLAR   1.3319
GB POUND / JAPANESE YEN 230.44
GBP/AUD 2.4289
GBP/NZD 2.7529
GBP/ZAR 14.3641
GBP/CHF 2.3901
GBP/CAD 2.2778
GBP/SGD 2.9800
GBP/THB 63.5417
GBP/HKD 15.3450

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