Yesterday saw the biggest one day fall in the value of the pound in percentage terms since it swan dived out of the ERM in 1992 and brings a new climate of nerves and fear to the market.

Poor manufacturing ISM figures from the world as a whole but in particular the UK, China and EU hammered equity assets lower with the DJIA giving back 2/3 of the total gains it made last week. The temporary breaks higher that sterling enjoyed on Thursday and Friday were exactly that; temporary. Both the cross against the euro and the dollar have moved back into their recent trading ranges but with a hell of a lot of downward momentum. We will be on the look out for confirmation and breaks towards recent lows but we believe this could be the start of the push lower to those figures that nobody wants to talk about anymore for fear of giving them credence; 1.40 against the USD and towards 1.10 against the European single currency.

Further risks remain this week with everything from interest rate decisions to the fate of GM likely to increase the volatility. The wind is once again in the dollar’s sails and further bombs dropped on an already shell-shocked market will increase its velocity.

The focus today will be on a number of things but we expect movement to be mainly driven by bearish sentiment and increases in risk aversion.

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.