Market Report

Sterling falls vs dlr after well flagged BoE hike.
Sterling hit a four-week low against a broadly firm dollar on Thursday as a widely expected Bank of England interest rate hike to 5.50 percent, coupled with soft UK trade data, sparked a bout of profit taking. The BoE raised rates by 25 basis points to a six-year high, a disappointment for some who had bet on a 50 basis points move and said inflation risks were tilted to the upside in the medium term.

Morgan Stanley Says Sell Dollar for Emerging-Market Currencies.
Investors have been advised to sell the dollar against emerging-markets currencies as a strengthening U.S. economy may enhance demand for assets in developing economies. First-time claims for U.S. jobless benefits dropped 9,000 to 297,000 in the past week, the fewest in almost four months, a report today from the Labor Department showed.

Australia, N.Z. Dollars Fall against Yen as Carry Trades Wane
The Australian and New Zealand dollars fell the most in three weeks against the yen after a slump in global stocks prompted investors to sell higher-yielding assets. New Zealand's dollar was the second-worst performer in the Asia-Pacific and Australia's third after Indonesia's rupiah, as traders pared so called carry trades, where higher-yielding assets are bought with lower-interest-rate currencies, after U.S. equities declined the most in almost two months.

Hope you all have a great weekend

JM

It was quite coincidental that the UK currency behaved exactly how Chelsea did last night against Manchester Utd. Nothing to shout about until the end!

The U.K. pound was little changed before Bank of England policy makers decide today whether to raise interest rates to the highest in six years to cool inflation. Economic reports yesterday showed consumer confidence rising to the highest since October and an increase in store prices, helping to push the pound to its strongest in a week. With speculation of a possible 0.5% interest rate increase from BOE, we could see an even brighter pound across the board by close of UK business.

With the US trade gap widening due to lack of exports of the energy type (soccer players included), a 0.5% rate hike in the UK could easily see 2 to the pound again. So an opportune time to book your holidays to Miami and Florida as the summer seems to be over here before it's even started!

The South African Rand seems to be the best performer at the moment. With speculation of further rate increases and higher demand for gold and platinum could see a major strengthening against its majors (USD, GBP & EUR). Possibly a whopping 15% VS the USD! So I've bought my spending money well in advanced for my Christmas visit to see the in-laws!

LR

Expectations

My comments on the markets today have similar sound to those of the company yesterday, not much change is expected in the European sessions until investors have repositioned themselves on the strength of Central bank rate actions today and tomorrow for the US, UK and ECB.

The overnight Asia & Australia sessions offered little in the way of direction markets are expecting the major currencies to head against each other over the immediate and coming days, with Sterling, Euro, Dollar & Yen trading in a fairly tight range.

The focus for the FED meeting, similar to that of the Charlton football after Monday's Losses, will be whether the US economy can display signs of holding on through the hard times of slow growth, thus how much longer can the rates be kept on hold before been cut, the ECB meeting will be watched for its comments in inflation, with a rate rise tipped for June and a robust German economy, will the one rate rise be enough to stop the inflationary pressure that could seep through. The UK rate decision poses a slightly more complex problem, in that the markets are undecided on whether we will see the one rate rise widely expected this month, or back to back to rises to 5.75% base by June giving the UK the highest interest rates of the G7 countries.

I wish now to finish touching on a slightly more important issue than Finance & Economics for the hearts of many of our readers and indeed the UK, that is, the sad loss of the Charlton Football Team as previously mentioned briefly. Like my thoughts for he US economy this year, the only way is UP, my message to the supporters and management, 'if you build it they will come', 'Rome wasn't built in a day', you'll never walk alone, whilst these quotes will not help the bank balance & imminent player losses, they should give them strength to hold on.

Till my next report!

DD

Will they wont they??

I think the begining of the week will be pretty quiet and long drawn abit like the final of the World Snooker Championship, as all eyes will be on the interest rate decisions from the Bank of England on Thursday. They will almost certainly be a 25 basis point hike in interest rates and a slight chance of 50bp to combat the current high inflation which is at 3.1. This leaves Sterling in limbo should they only hike by 25bp, I feel that GBP will weaken slightly against the Euro and the Greenback. Sticking with interest rates on Wednesday evening we expect theFederal Reserve to leave the US interest rates unchanged at 5.25.

As for current affairs France have a new President Nicolas Sarkozy. Yesterday he made a retreat to consider his government line-up and plot strategy for a crucial parliamentary election in June. Sarkozy, a combative conservative, won a strong mandate for political and economic change by winning 53.06 percent of the vote in Sunday's presidential run-off against 46.94 for Socialist Segolene Royal.

On the sport front there are congratulations and commiserations this morning. Well done to Manchester United I think the best team won when you look back over the season and Tottenham last night sealed Charlton's fate. This weekend could see one of three teams join them West Ham, Wigan or Sheffield United. I hope West Ham continues to blow bubbles and it doesn't burst.

Have a good week.

DH

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