A unanimous decision to cut interest rates was the outcome of October’s MPC meeting. This seems to sum up the sentiment surrounding the UK economy and Sterling’s fortunes, as the dramatic U-Turn in voting choices by the committee is reflecting the changes recently witnessed in the global economic environment. Each member of the committee voted to cut rates in order to provide some impetus to an economy teetering on the brink of recession.  It was decided that medium term inflation risks have reduced dramatically recently and the MPC now sight inflation undershooting the 2% target as a concern. The case for another 50bp rate cut next month looks to have strengthened further on the back of this

Sterling lost over 4% in the cross with Dollar as a result, and was hammered into an 8 year low against Yen at 160 levels. Yen looks to remain in a strong position as unwinding of carry trades provides ongoing demand. Euro continued to weaken against the dollar and has well and truly broken through the 1.30 levels that were providing some resistance.

The Hungarian Central bank bucked the easing trend and raised rates 3% to 11.50% in order to try and provide some support for the hapless Forint. New Zealand reduced the OCR to 6.5% as expected, with Governor Bollard noting that “Should the outlook for inflation evolve as projected we would expect to lower the OCR further”.

And the inflation outlook has continued to evolve with oil now trading at $67 a barrel.  OPEC, lead by Iran, are looking to cut supply in order to return stronger prices and oil will therefore continue to remain volatile in the short term. Today, we have initial jobless claims from the US and retail sales figures from the UK. We also look to the action from equities after yesterdays sell down.

Please feel free to contact me (rick.roache@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.

To view any past or present currency blogs please click on the following link www.worldfirst.com/blog

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.