Yesterday was another day of dollar strength with worldwide recession fears seeing a flight to safer assets and major dollar crosses all going the greenback’s way. Dollar hit a six month peak against the yen while also holding the pound to the 1.94 levels and pushing the euro cross down close to key long term technical areas. The yen was hurt by a government official acknowledging that the Japanese economy may already be in a recession.

Today we will be busy. Both the Bank of England and ECB announce their respective interest rate decisions with holds predicted for both. The Bank of England will prefer, wisely we believe, to sit on their hands in the near term and allow the slowdown to tackle inflation itself as supposed to having to jump in with dovish moves of its own. The CPI currently sits at 3.8%, although figures released overnight by the IMF predict food price inflation to be nearer 10%, and therefore although we believe the next move form Threadneedle St. will be lower it will not be feasible until Q4.

Across the channel the story is little different. Trichet may have to moderate his typically hawkish bolshiness however as reports claim that German GDP fell by 1% in Q2. This should hurt the euro and hopefully see the GBP/EUR cross move back to the highs of the current trading range with enough momentum to stage a breakout.

In corporate news Barclays released its earnings figures for the first part of 08 20 minutes ago with profits down 33%. RBS report tomorrow to close off this latest earnings season.

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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.