MARKET REPORT WENESDAY 4^th JUNE 2008

Good Morning,

Both Sterling and the Euro weakened against the dollar in volatile trading yesterday after a rare warning about inflationary risks posed by a weak dollar from US Federal Reserve chief Ben Bernanke. The comments, which caused the dollar to jump broadly, proved too much for the already struggling pound after bleak UK economic data and banking sector jitters earlier this week. The Dollar strengthened to 1.9600 from 1.9720 against Sterling and 1.5430 from recent levels of 1.5585.

Chairman Bernanke made his most explicit expression of concern to date about the value of the dollar. He said the Fed will continue to carefully monitor developments in the foreign exchange markets and are attentive to the implications of changes in the value of the dollar for inflation. He went on to say that inflation expectations will continue to formulate policy to guard against longer-term inflation expectations. Analysts suggest these comments could signal a shift in Fed policy, as it is unusual for the central bank to speak on currency matters and this makes future rate cuts seem unlikely.

Poor construction data from the UK continued to paint a poor economic picture as construction activity dropped last month at it’s sharpest pace in at least a decade as falling house prices and tight credit took their toll.

UK service sector data is due out today and is expected to show near stagnation with the activity index forecast to stay unchanged from the previous month.

In the US , data includes mortgage late payments and Employment changes, however, this is seen as a fore runner to the non-farm payrolls and employment data due on Friday

Michael Ince

Archive News

This commentary is generic and may not suit all circumstances. Before taking any action, we recommend either contacting your trader for guidance or obtaining independent financial advice. The information in this document was obtained from sources believed to be reliable but its accuracy and completeness cannot be guaranteed. The views and recommendations in this communication are typically short term trading views. Comments constitute views at the time of writing and are subject to change without notice. The rates shown are all indications. For specific quotations, please contact your usual trader. This document is not intended as an offer, solicitation or recommendation to buy or sell.