Market Report

The dollar may weaken to $1.45 per Euro this year as a surge in the price of oil to record levels, accelerates a U.S. economic slowdown.

The dollar will extend its slide versus the Euro and Sterling as the U.S. is the most likely of the major economies to suffer on rising energy costs, as it's the world's biggest oil importer. The U.S. consumes one quarter of the world's oil, which reached an all-time high of $90.02 a barrel in New York today.

The U.K. economy probably grew at the slowest pace in a year in the third quarter as services weakened, a sign higher borrowing costs are starting to restrain expansion, a survey of economists showed.

Gross domestic product may have increased 0.7 percent from the second quarter, when it expanded 0.8 percent, according to the median of 34 forecasts in a Bloomberg News survey. On the year, expansion probably held at 3.1 percent, the survey showed. The Office for National Statistics will release the report today at 9:30 a.m. in London.

We have seen another tough week for the USD against most of the other major currencies and with oil prices soaring, the continued problems with the mortgage crisis and further interest rate cuts on the horizon there will be no let up in the pressure on the greenback in the foreseeable future.

VC

Just like the England Rugby team, Sterling steadied versus the Euro and the dollar on Wednesday, at the start of a key day for the UK interest rate outlook. Investors will look at minutes from this month's Bank of England meeting as well as to unemployment and average earnings data at 09:30 BST for clues on whether the BoE is likely to cut rates in coming months, and how soon it might make such a move. Expectations of a cut, perhaps even as soon as next month, got a boost on Tuesday after UK inflation for September came in at a below forecast 1.8 percent year-on-year.

South Africa's rand fell against the dollar and the Euro after a decline in global stocks and record oil prices crimped demand for riskier investments. The currency of Africa's biggest economy dropped against 14 of 16 most-actively traded currencies today after Federal Reserve Chairman Ben S. Bernanke said yesterday the housing slump in the U.S. will be a ``significant drag'' on growth into 2008. Oil rose to a record, nearing $88 a barrel, on concern Turkey may attack Kurdish militants in Iraq and disrupt shipments.

LR

The Great British Pound strengthened against the Dollar and dipped slightly against the Euro yesterday, caught in the middle of currency moves as traders digested news three top U.S. banks are pooling money to prevent investment funds from dumping assets on the market. The announcement from Citigroup, J.P. Morgan Chase and Bank of America that they've set up the multi-billion dollar fund infused the Foreign Exchange market with a slight appetite for risk and yield.

This helped push the UK pound up against the dollar, and the Euro up against most pairs. There is still generally belief the U.S. Federal Reserve's next move on interest rates will be a cut and the European Central Bank's will be a hike. As far as UK-specific factors are concerned, the Bank of England minutes from the Monetary Policy Committee's last policy meeting and inflation and retail sales figures later in the week could give the pound direction.

Euro zone money markets, in particular, have tightened up owing to the credit crunch of recent months. Any measures that successfully loosen short term lending conditions could support the Euro because the ECB might be more inclined to deliver another inflation-taming rate increase.

Things to watch out for today 09:30 CPI and RPI, Should the CPI come out above 2% this will almost certainly in our view extinguish the talk of an interest rate cut this year will be bullish for Sterling. Then from across the pond at 14:00 the Net Long-term TIC flows. TIC data will highlight the US ability to attract overseas investment. A bigger than expected number will be positive for the US, particularly in the light of the recent drop in their trade deficit.

Have a good day.

DH

What a week, first the English Rugby team beat Australia last Saturday, and then this weekend they beat the French! Combine that with the England football team winning again made it a great week for sports fans.

Last week the Dollar continued to stay weak against both the Euro and Sterling.

Today we have no economic data from the UK. Later today we have US empire manufacturing Index, as well as both Paulson and Bernanke speaking later this evening. Later in the week we have CPI, Jobless figures and retail sales from the UK. From the US we have CPI on Wednesday.

Have a good week. Good Luck England on Saturday, i think we might need it!!!

DE

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