Market Report

Coming into work yesterday I felt it might be another quiet day with GBP/EUR staying in the narrow range of 1.46 to 1.4650. However, after the Bank of England surprisingly put interest rates up by a quarter percent to 4.75, the markets were taken by surprise and GBP/EUR jumped to 1.4750. The next move for GBP/EUR will probably rely on the UK inflation report next week, and the Bank of England minutes the week after. If these indicate another hike, we may see GBP/EUR even higher.

The European Central Bank also put their interest rates up by a quarter of a percent, but as this was expected, this was factored into the exchange rate and didn't effect the markets.

GBP/USD started yesterday at 1.87, but after the shock interest rate hike in the UK, climbed to as high as 1.8910 before coming back down to 1.885. Today sees the US Non-Farm Payroll which should give us an indication of whether the FED will have another hike in interest rates next week. It is expected that the figure will be a gain in non-farm payrolls by 140k, and if this is the case we would expect a rate hike next week. Whatever the figure, we usually see movements in the currency markets when it is non-farm payroll day, so hold on to your hats and let's see what happens.

Have a nice weekend.

DE

Good Morning,

The main focus today will be interest rate announcements from Euro zone and the UK, with the ECB widely expected to raise rates 25bp to 3% at 12.45pm GMT, we feeling this has already been accounted for in the rate.

The Bank of England decision will be at midday. We think the Committee will vote to keep the rate unchanged at 4.5% but in a Reuter's poll 17% of economist think that there may be a hike. They have done it before and should they do it again we could see sterling weaken this afternoon, so should be an interesting lunchtime.

At 13.30 we have the US jobless claims the consensus is around 305k new claims. Then we look for a robust 1.9% rise in June US factory orders (consensus 1.8%) at 3pm, as durable goods orders surged in June and energy prices were stable all these reports combined to tell us what state the US economy is in and where the next moves the dollar shall make but it seems what everyone is waiting for at the moment is the non-farming figures tomorrow at 13.30 GMT.

DH

Yesterday's speech by Hank Paulson was a potential banana skin for the USD but he managed to keep his comments neutral. The USD still looks to remain under pressure today currently trade at 1.8760.

Non-farming payroll numbers are due out on Friday at 13.30 and will give us an indication on whether the FED hikes its rates next week. Should it be a strong number then there is a possibility they will raise their rates, but our view is that they should remain unchanged and there will be another move late in the year.

As we said yesterday Sterling against the Euro at present seems to be quite stable with decisions by the Bank of England and the European Central Bank on interest rates this Thursday, the Sterling rate against the Euro opened this morning at 1.4646.

The European Central Bank will almost certainly raise their rates by a quarter of one percent but this has already been priced into the rate. The Bank of England we believe will remain unchanged. Should there be any variation in these figures be prepared for some fireworks in the markets.

There are no major data releases today.

DH

Good Morning all, we are still seeing a weak Dollar at the moment opening this morning at 1.8677 this is being fuelled by the possibility that we are coming to the end of the current cycle of interest rate hikes. This accompanied with the Middle East situation and the rise in oil prices is taking its toll on the Dollar. In our opinion this negative feeling is misplaced and I we believe there will be more rate increases shortly.

The United States Treasury Secretary will give a speech this evening that will be closely monitored as the markets want to hear positive indications for a strong Dollar. More importantly the release tonight of the retail sales numbers is likely to have a more immediate effect on the rate.

Sterling against the Euro at present seems to be quite stable but don't be fooled this could change very quickly with decisions by the Bank of England and the European Central Bank on interest rates this Thursday, the Sterling rate against the Euro opened this morning at 1.4632.

The European Central Bank will almost certainly raise their rates by a quarter of one percent but this has already been priced into the rate. The Bank of England decision is less clear but in our opinion will remain the same. Any variation on these predictions could spark the rate into life once again.

VC

Morning all hope you had a very relaxing weekend. Although the decision on interest rates from the United States is not due until next week, last weeks weaker than expected figures seems to have dented the confidence that was in the market for a rate rise. This could all be reversed depending on the data released later this week. This morning saw the Dollar rate against Sterling open at 1.8635 and currently standing at 1.8658.

The Sterling rate against the Euro is still quite strong at the moment opening this morning at 1.4604 this is being fuelled by the good figures released last week regarding mortgage borrowing and some experts believe we may see an interest rate hike soon. These opinions are in the minority as in my opinion we will not see a rate hike in the near future. The European Central Bank have there meet on Thursday and it looks a racing certainty that they will raise there rates to 3% this will have probably have little effect on the rate as it has already been priced in.

VC