MARKET REPORT THURSDAY 7^TH AUGUST 2008

Good Morning,

Yesterday’s currency markets were quiet ahead of today’s monetary policy and interest rate decisions by the Bank of England and the ECB.  The only data release in the UK was the British Retail Consortium’s announcement that UK high street prices rose 3.2% year on year. The figures reinforced the on-going inflationary pressures on the UK economy with a weakening but no significant effect on Sterling except the Dollar which made gains below 1.95

The markets await the BoE rate decision at 12.00 where the MPC is expected to keep interest rates unchanged at 5.00% due to a slowing economy and growing inflationary pressures and will look at August 21st MPC minutes release for a true insight into to the decision making process.

Elsewhere, in Europe yesterday, German manufacturing new orders dropped in June, falling by 2.9% m/m after a drop of 1.4% in May. German manufacturing orders have now dropped for seven months consecutively with the downward trend demonstrating the slowing Euro area business activity is affecting the strongest major economy this year. Despite fresh data this morning showing German export figures have risen in June, exports for the quarter were still lower by 0.4% demonstrating the effects of the global economic slowdown. Whilst such data releases point towards the risk of recession, analysts are forecasting the ECB will hold interest rates at 4.25% in its 12.45 announcement and the ECB Governor, Trichet’s accompanying statement at 13.30 will provide further clarity on the decision

In the US today we look for initial jobless claims at 13.30, pending home sales at 15.00 and consumer credit data at 20.00 for more clues on the state of the US economy.

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.