A surprise vote for a UK interest rate hike saw sterling jump to its highest levels against the euro since early May and back above 2.00 against the dollar.

Tim Besley voted for a hike to 5.25% to combat the rising inflation problem while David Blanchflower voted for a cut to stimulate growth and haul us quickly away from a recession. The minutes of the meeting were much more hawkish than expected which further helped GBP higher. This jump however may prove to be nothing but short and sweet as today’s retail sales figures are likely to confirm that growth in the UK economy is indeed faltering.

Euro was not done any favours yesterday by a poor industrial new orders figure which showed that the Eurozone is now certainly feeling the effects of the global slowdown although further data to corroborate will be needed to assuage fears of a catatonic GBP/EUR cross.

As you may have already seen from our colleagues in New Zealand, NZD is weakening drastically against all of its crosses after the RBNZ cut rates to 8% citing increased risk of recession and pain from the credit crunch.

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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.