Euro Pounds Brief Tuesday 06/03/2007

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Tuesday 06/03/2007

• Yen suffers as equity markets stabilise
• The pound recovers after a rocky session yesterday
• UK retail sales up 5% for February
• Cable prints a low of 1.9182 overnight
• Greenspan sees a one third probability of a US recession
• Oil stabilises following investor fears in equity sell-off

US Dollar:

The dollar was the main beneficiary of the yen carry trade unwind yesterday. The dollar rallied against the
pound testing lows in cable and also rallied versus the Euro. This morning the cable has rallied as the FTSE
looks set for a better day with the Dow and the Nikkei consolidating following heavy losses last week.
Elsewhere Former Fed Chairman Greenspan reiterated his concerns of a US recession noting that he saw a
one-third probability this year as the US economy looks to be coming to the end of a six-year expansion. Current
Fed Chairman Bernanke did not comment on these remarks however Treasury Secretary Paulson said the
global economy was in the best shape he’d ever seen.

Pound:

A tough day in the sterling market as expected with continued pressure from the dollar. Cable looks a touch
better this morning however we are expected to run into resistance should the rally continue. After an initial
drop against the euro the pound rallied throughout the course of the day thanks to Euro softness against the
dollar and the cross looks to have stabilised towards the 1.47 level.
Overnight the British Retail Consortium released February’s retail sales figures which showed the strongest
high street trading for 7 months adding to pressure on the MPC to raise rates this week. This morning the
futures markets have opened under pressure which may force the MPC into a rethink in Thursday’s meeting.
With the large drop in the CPI this month rates seem unlikely to go up this month.

Euro:

The Euro struggled against a headwind yesterday and today as first it came under pressure from the dollar
and then from the pound this morning. It is rallying against the yen as panic unwinding looks to have stopped
however with little data driving the market and fairly low yields the Euro should stay fairly stable.

General News:

• Following the rapid appreciation of the yen sparked by falling equity markets the panic seems to have
subsided with some of the big players going back to selling yen in order to pick up some cheap stocks.
It looks suspiciously like investor appetite for risk has not been dented by this correction in stock markets.
• Equity markets look set for a better day today having been plastered for the best part of a week. More
then £111bn has been wiped off the FTSE. The Nikkei closed up over 200 points.
• Oil stabilised in trade yesterday following fears demand may subside following the rout in the equity
markets. Investors are still concerned over an OPEC production cut which may be keeping prices above
$60.

Interbank foreign exchange rates:
Updated 6th March
G BRITISH POUND / US DOLLAR 1.9275
GB POUNDS / EURO 1.4685
EURO / US DOLLAR  1.3122
GB POUND / JAPANESE YEN 224.45
GBP/AUD 2.4873
GBP/NZD 2.8299
GBP/ZAR 14.2656
GBP/CHF 2.3550
GBP/CAD 2.2725
GBP/SGD 2.9491
GBP/THB 63.817
GBP/HKD 15.0754