Dollar has broken through the 1.40 barrier against the euro for the first time in 12 months as speculation increases that the European Union will see a more severe recession than the US and that ECB rate cuts are all but assured. Sterling also managed to jump on the euro negative band wagon as the GBP/EUR pair crept through the 1.25 level, the first time this has happened in 2 weeks.

The negative news from Lehman Brothers that the market expected largely, currency wise, turned out to be a tempest in a teacup. The bank reported a $4 billion loss and is now looking at selling a swathe of high-value assets in order to bolster liquidity. When Bear Stearns began to wobble earlier this year JP Morgan flew in and snapped them up; game over, cheque please. There is not another white knight in the wings however and Lehman may simply fold in the coming months should these issues not be rectified.

NZD has weakened significantly overnight after the RBNZ shocked the markets with a 50bps cut. The New Zealand economy is widely seen as being in a recession and this, we believe, is simply the beginning of a vicious cutting cycle.

The quiet data week continues with only US initial jobless claims and the ECB monthly report of any note.

———————-

 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.