I have made a Lazarus like recovery from my depths of despair on Friday and would like to thank all who took the time to reply especially those bearing gifts of hangover cure recipes. The question now of course is whether sterling can make a similar recovery against the euro or is doomed to another few weeks in the gutter?

John Varley, head of Barclays bank, is quoted as saying that the housing market is due another sharp fall while the economy is only half way through the turmoil; and you thought I was a doom monger. The financial services sector will be in for a tough couple of days as the mess surrounding Bernard Madoff’s Ponzi scheme debacle  is unravelled with a couple of European bank’s already admitting their involvement. The largest is said to be Santander; the owners of Bradford & Bingley, Alliance & Leicester and Abbey who are said to have over £2 bln tied up in Madoff’s vehicles. A blow to Spain’s largest bank is a blow to Spain itself and would further damage its already beleaguered economy.

Sterling has made a slight gain against the USD over the course of the weekend as markets begin to factor in rate cut assumptions for the Fed meeting tomorrow. We are happy to predict a 50bps cut which would take the rate down to 0.5%, a historic low. Some analysts are predicting that should the Fed cut this low that money market funds are likely to be hammered by investors looking to withdraw their funds as the risks by far outweigh the gains. Such movements would be a blow for US credit markets and would give the markets yet another risky edge.

Most comment will be about the Fed today as it is a fairly quiet data day.

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.

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.

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