MARKET REPORT FRIDAY 8 TH AUGUST 2008

 Good Morning,

 Yesterday, as the market expected, the Bank of England kept interest rates on hold at 5.00% and as the MPC did not change the interest rate a statement was not released following the announcement. With many reports showing the UK economy is heading for a significant slowdown, and inflation levels expected to rise above 4% the decision to hold did not surprise the market. Further news out of the UK yesterday included the Halifax House price index, which showed house prices fell 1.7% last month taking the annual rate of decline up from 6.1% to 8.8%.

 In Europe yesterday the ECB also left rates unchanged at 4.25% as per the market forecast. In the following press conference ECB Governor Trichet insisted inflation was still the ECB’s main concern, but added mid-2008 growth would be substantially weaker than envisaged at the start of the year. The market interpreted the comments as a sign the central bank is less likely to hike rates and may even reverse course and drift towards an easing policy. The effect of this was to weaken the Euro and against Sterling the rate moved to 1.27 and as low as 1.53 against strong support for the Dollar.

 Overnight in Asian trading, and this morning in Europe , the US dollar rose sharply to a five month high against the euro at 1.5120 and a 17 month peak against sterling to 1.9220. With negative news from the US economy being the key focus of the market recently yesterdays comments from the ECB press conference highlighted the fact economic slowdown is not solely a US problem and is more of global wide issue.

 Michael Ince

Archive News

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