Yesterday was a day of retracement with both the dollar and euro losing ground to an emboldened sterling.

Opening the day was investor sentiment that jumped harder on sterling’s weakness and pushed it briefly into the 1.10s before it retraced back above 1.12 briefly.

Usual market analysis has not got us far in recent months; the topsy turvy nature of the markets has rendered a lot of preconceived knowledge as useless but some semblance of normality returned in afternoon trading.

Revisions of what the FOMC is going to do later today weakened the dollar. Our forecast yesterday was 50bps but the market curve is now happier with a more drastic 75bps. This would take Fed Funds to 0.25%; an all time low and somewhere we have all been recently.

Potential losses from the Bernard Madoff Ponzi scheme are still being calculated with about £3bln being forecast in losses from UK institutions. This of course had a bad influence on equity markets although the risk argument was outweighed by the potential interest rate movement.

Barring anything extraordinary today should be a day for continued reconciliation and could see a weakening of the against both EUR and GBP.

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:

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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.