Sterling took a monstrous beating yesterday as UK banking shares were hammered on the FTSE. At the open Barclay’s, HSBC and Lloyd’s TSB all shot lower as the market took the opportunity to act on the latter’s decision to cede more control to the UK government. With the correlation between the financial sector and the pound still firmly entrenched sterling started to bomb lower immediately finally resting at a 6 week low against both the USD and EUR.

We are of the opinion that this is a short term blip however as key technical levels managed to hold; the levee didn’t quite break but sprung some big old leaks if I may. The price action in equity markets should reverse as bank shares are now seriously cheap and sterling, much like one of my soufflés, should rise if the right ingredients have been chucked in.

The main data yesterday was that wasn’t any although the ECOFIN meeting outlined that European Finance Ministers are unwilling to comply with America’s wishes that they extend the amount made available in stimuli packages.

Data for the UK housing market and high st. has already been released this morning. The RICS house price balance fell to yet another record low as the lack of affordable mortgages stifled an increasing number of buyer enquiries. The largest increases in interest were seen in London, Wales and the South West. The heavy snow hurt shops and shoppers in February according to the BRC as like for like sales fell by 1.8%.

Other data releases of note today include German CPI and both UK manufacturing and industrial production. All these could all be overshadowed however should the FTSE and its banking constituents continue to fall.

Further analysis is of course always available at our video blog http://uk.youtube.com/user/WorldFirstJC

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.

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