Poor old moggy. The stock market joy was short lived and is now being seen as a typical dead cat bounce with recessionary fears hammering bourses worldwide. The DJIA succumbed to its biggest percentage drop in 20 years as the fears of a long, hard recession grew.

It seems the banking crisis is over the worst; LIBOR rates are continually yet gradually falling and sentiment is returning to the city allowing credit markets to release the fear-born stranglehold. The economic crisis is just beginning however; the main fallers on equity markets yesterday were oil and mining companies who have seen the price of their goods start to tumble in the face of slashed demand.

Retail sales in the US fell by the largest amount in 3 years while core prices for producers jumped to 4.0% on a year by year basis. The New York Manufacturing Index, a study of manufacturers in New York State, was also sharply lower adding to the gloomy outlook for the US economy. We see this continuing; a stronger dollar, stronger yen and sinking commodity prices will form the foundations of a bearish future for financial markets and dollar buyers may be wise to hedge upcoming exposures.

South African rand was the main victim currency wise of these latest recessionary fears as it fell 14.9% against the dollar and 12.6% against sterling. Other EM currencies were also slapped around fairly massively; PLN, for example, trading 5% weaker. 

Every single piece of Tier 1 data is from the US today and as such a rocky ride for dollar crosses is forecast. CPI, jobless figures and Philly Fed manufacturing are all expected to strengthen negative sentiment towards the US economy and continue the gloomy outlook.

This is my last update for a couple of weeks but my colleague Rick Roache will continue the efforts. Please be nice to him.

Please feel free to contact me (jeremy.cook@worldfirst.com) if you have any questions or thoughts regarding these updates or if you are interested in a particular event in the calendar. If you would like to discuss your foreign exchange requirements, please contact our:Corporate Foreign Exchange Team on 020 7801 9050 or our Private Client Currency Exchange Team on 020 7801 9080. Disclaimer: The above comments are only our views and should not be construed as advice. You should act using your own information and judgement. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgement as of the date of the briefing and are subject to change without notice.Any rates given are “interbank” i.e. for amounts of £5million and thus are not indicative of rates offered by World First for smaller amounts. E&OE. Definitions of jargon/market terms can be found in our Glossary of Foreign Exchange Terms.

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