2 of the big hitters in US financial circles combined to underpin the dollar yesterday. In early trade any recovery was stifled by Wachovia Bank’s earning figures which missed analysts’ estimates however Treasury Secretary Hank Paulson and Philadelphia Fed Chairman Charles Plosser took to separate stages and the onslaught began.

Secretary Paulson, in comments to Bloomberg, spoke of his belief that a bill shoring up Fannie Mae and Freddie Mac would be passed and enacted by the US Congress by the end of the week in an attempt to calm the rather jittery markets. Plosser’s speech was more down the line anti-inflationary than we’ve heard from a US voter in a fair while.  He spoke of the need to act ‘sooner rather than later’ to fend off inflation and that waiting for growth to turn around was unadvisable. Dollar as a result closed below a recent key technical support point and we will wait and see whether the surge into the 2.00s has now been broken. GBP/EUR was fairly quiet yesterday due to the dearth of economic data but sterling managed to squeeze out a small gain.

Looking forward to today we can expect some volatility on sterling crosses as we wait for the minutes from the latest MPC meeting. The voting record is forecast at 8-1 with the Blanchflower expected to have voted for cut given his well publicised views that the UK is already in a recession. The single currency could weaken as well as we expect poor manufacturing figures from the Eurozone as the average now starts to feel the slowdown in the weighty German economy.

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 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.