The optimism that the weekend’s developments provided has proved to be short lived as bearish sentiments began to cast a pall yesterday afternoon. Although some equity sectors and commodity currencies benefited on the back of the Chinese stimulus package, which some are likening to the ‘New Deal’, we believe this is merely the calm before another storm.

US stock markets retreated lower yesterday with the VIX volatility index significantly higher; previous instances of this have seen risk aversion increase dramatically and strengthen USD, CHF and JPY. A move lower on the sterling cross against these currencies is something that we would recommend guarding against soon via a short / medium term hedging strategy.

Sterling was also on the ropes yesterday as it hit a record low against the euro as PPI in the UK slowed at the quickest rate in over 24 years, an indication that CPI should fall by more than expected next week and allow the Bank of England to cut rates further in coming weeks. Sterling was also challenged by the largest annual fall in High St sales in 4 years and another record low in house purchases. The British Retail Consortium figures showed that the economy experienced the first fall in the value of total sales; for those of you who are retail minded that means one thing; heavy and harsh discounting to come. The figures from RICS were little better as it emerged that the average estate agent’s office sold 11 properties in the past 12 weeks and in the case of London agents a fortnightly completion is seen as the average.

Today is another quiet day on the data front with only the German ZEW economic sentiment of note. We will be looking towards corporate earnings news today (Vodafone) and the direction of credit markets to cement our belief that another downward turn is just around the corner.

 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.

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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.

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