MARKET REPORT MONDAY 10^th MARCH 2008

Good Morning,

The dollar took lost ground again on Friday after data showed U.S. employers unexpectedly cut 63,000 non-farm jobs in February, the steepest rate of job cuts in nearly five years. The news heightened worries that the U.S. economy had slipped into recession and sent the dollar tumbling to record lows against the Euro. Concerns about a U.S. recession and the subprime mortgage crisis as well as the outlook for interest rate differentials are likely to keep the dollar under pressure. Investors still expect the Fed to cut interest rates by 75 basis points at their March meeting.

The European Central Bank kept interest rates steady at 4 percent last week to fight inflationary pressures, and a poll of economists showed no forecasts for an ECB rate cut in April. This helped fuel the Euro to record levels of 1.5400 against the dollar.

Sterling also rallied to its strongest level since Mid December versus the dollar, as the Bank of England left rates on hold at 5.25%. Sterling has gained more than 4% against the Dollar trading as high as 2.0250 in the last 3 weeks as market expectations of easing from the Fed have grown. By contrast, expectations on the extent of monetary easing in the UK have fallen, with markets in early February pricing in as much as 1.25 percentage points of cuts by year-end from the Bank of England, compared to less than 75 basis points now.

Today, Manufacturing activity and price data for the UK are released at 09.30, with input price annual inflation set to be the highest since May 1980.

Other data and events this week include US January Trade (tomorrow), Retail Sales figures and an address by Fed Chairman Ben Bernanke (Thursday). Euro Industrial output (Weds) and final HICP (Friday).

Michael Ince