MARKET REPORT MONDAY 16^th JUNE 2008

Good Morning,

Following on from last week, Sterling gained ground against most currencies except the Dollar as oil retreated and U.S consumer prices increased beyond initial estimates in May. Although policy makers have acknowledged the current risks to economic growth are worsening, the tone of the Bank of England report on last months MPC meeting will probably reiterate the rising inflationary concerns that kept them from lowering UK interest rates in June. The voting of the committee will also be closely watched as a resounding 9-0 in favour of the no change will probably support the Pound. The annual pace of inflation has now reached the government’s 3.0% limit and the latest CPI numbers are due on Tuesday.     

Despite statements from a number of ECB officials over the past week, the Euro came under additional selling pressure on Friday as it emerged that Irish voters would reject the Lisbon treaty. Although this news has weakened the Euro in the short-term and dealt a significant blow to the European Union the impact of the Irish rejection of the treaty is expected to be limited.

The Euro has dropped to a near three month low versus the Dollar and the single currency may struggle to make gains this week with a lack of economic data being released in the Euro-zone.

The Dollar having recorded its biggest weekly gain against the Euro last week and reached below 1.9500 levels against the Pound as the prospects of a U.S interest rate increase over the coming months increased. The improved outlook for the US economy combined with rising inflationary concerns means that policy makers may lift rates from 2.0% as early as August after U.S consumer prices increased.

Michael Ince

Archive News

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