An unprecedented move by central banks around the world was unable to solidify sterling yesterday as the pound suffered heavily against the dollar and euro. Central banks in the UK, US, EU, Canada, Switzerland and Sweden were joined overnight by their colleagues in South Korea, Taiwan and Hong Kong in cutting interest rates as a second step to government authored rescue plans. The coordinated methods that the central bankers have used were needed, in our opinion, to avoid the ‘beggar thy neighbour’ squabbling that erupted between EU member states over deposit guarantees last week. Although we have seen these cuts we cannot expect the liquidity in credit markets to improve vastly overnight; LIBOR will not dip by a huge amount today.

Treasury Secretary Hank Paulson used the opportunity to further emphasise that the US is committed to helping the financial system through this difficult time. He also warned the markets that although the TARP had been passed by Congress then some banks may go under, which could account for the share price falls of banks in late trading.

We always try to look for the silver lining here at World First and oil may have provided it. The price of a barrel of West Texas Intermediate has fallen 40% from the high and is currently trading in the high $80s. Further falls are possible with predictions as low as $50 being bandied around as demand drops, the USD strengthens and thoughts that this winter may not be as cold as recent ones.

We were expecting today to be dominated by the Bank of England rate decision but and it will be, to a certain extent, as the market digests the coordinated effort. Stock markets have made tentative gains in Asian trading with the FTSE predicted to open 1.5% higher this morning. The ECB monthly report is also due today alongside American initial jobless claims.

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.