Lehman Brothers, the 4th largest investment bank on Wall St, will file for bankruptcy today amid billions of dollars of losses through toxic mortgage market investments. Both Barclays and Bank of America were in talks to take over the beleaguered institution over the weekend however without a Federal Reserve guarantee for the mortgage debt the risk was obviously too high.

Lehman was not the only financial institution to make headlines over the weekend as Bank of America announced an agreement to buy Merrill Lynch for $50bn and AIG, the largest insurer in the world and known more prominently in the UK as the head sponsor of Manchester United, asked the Federal Reserve for a $40bn loan facility as it goes through an ‘extreme liquidity scare’.

Sterling rallied sharply Friday as dollar and euro data fell to the downside. US PPI data showed a  dramatic decline on the back of a 4.6% fall in energy prices although food prices for commodities such as pork and eggs are still experiencing double digit percentage price increases. Inflation is still at the most elevated rate since 1991 however with the prospect of sub-$100 barrel oil further price retreats are likely to cut down estimations of interest rate increases by Ben Bernanke and the Fed.

European industrial production fell alongside investment, exports and consumer spending in Q2 and the trend continued on Friday with a 0.3% decline allowing sterling to jump over the 1.26 level for the first time in weeks; continuing the trichotillomaniacal persuasion markets have taken recently.

Today will be dominated from news from the US and as such may be a very volatile trading day.

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 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.