Sterling continues to look strong ahead of tomorrow’s Bank of England interest rate meeting where analysts are expecting a 0.25% rate hike.

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Wednesday 8/11/2006

• Dollar sent tumbling by Fed official speech
• Democrats seize control of House of Representatives
• Reserve bank of Australia raises rates
• German trade surplus rises more than expected
• Sterling continues to firm ahead of BoE
• Oil tumbles on fund selling

US Dollar:

The dollar took another hit yesterday following a speech from the Fed’s Yellen who said that some
countries with excess savings may choose to invest less money in the US. This should have come as no
surprise to the market as Alan Greenspan, former Federal Reserve chairman, warned of central bank
diversification several times in recent months.
Losses were however pegged back as Chicago Reserve Bank president Moskow reiterated that inflation
risks were still skewed to the upside and that ‘additional firming of policy may yet be necessary’.
Elsewhere in the US the Democratic party won control of the House of Representatives-the first time in
12 years. The Senate however remains too close to call.

Euro:

The German trade surplus numbers came out higher than expected at €15.2million helped by a sharp
rise in exports.
The Euro looks to be fairly stable as the markets price in a December rate hike.

Pound:

Sterling continues to look strong ahead of tomorrow’s Bank of England interest rate meeting where
analysts are expecting a 0.25% rate hike. All eyes will be on any additional comments for clues as to
future actions of the Monetary Policy Committee
Meanwhile the National Institute of Economics and Social Research issued an upbeat forecast of the UK
economy, estimating that the economy grew at a quarterly rate of 0.7%.
Stocks look set for a rocky opening as news of President Bush’s poor show in the US mid-terms hits the
markets.

General News:

• In Australia the reserve Bank of Australia raised interest rates by 0.25% to 6.25% as expected.
Profit-taking in long positions has caused minor softness in the Aussie and Kiwi dollar.
• Oil prices dropped 4% as funds sold the price down ahead of OPEC’s announcement that production
will be cut. Oil now trading $58.96.
• Airbus owner EADS took a blow as Fedex cancelled their order for the gargantuan A380.

GB POUNDS/US DOLLAR 1.9057
GB POUND/EURO 1.4917
EUR/USD 1.2772
GBP/JPY 224.19
GBP/AUD 2.4751
GBP/NZD 2.8452
GBP/ZAR 14.0333
GBP/CHF 2.3815
GBP/CAD 2.1551
GBP/SGD 2.9748
GBP/THB 69.951
GBP/HKD 14.8360

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