MARKET REPORT WEDNESDAY 25^TH JUNE 2008

Good Morning,

Sterling lost some ground against the Euro yesterday after a report showed that UK mortgage approvals slumped to the lowest level since Labour came to power and as the markets scaled back the possibility of a UK interest rate hike over coming months. The Bank of England faces the unenviable task of balancing slowing economic growth against the fastest pace of inflation in a decade. Sterling moved higher against the Dollar above 1.97 levels as the market awaits the Fed decision on interest rates.

The Euro generally stood firm yesterday despite reports in both Germany and France that consumer confidence has declined as rising energy costs were affecting household spending and adds to recent evidence that economic growth is slowing. Europe has remained largely un-affected by a U.S led slowdown but a recent spate of negative economic reports has dimmed sentiment and led to speculation that the European Central Bank faces the same dilemma as the Bank of England in balancing upside inflation risks against a slowing economy. The ECB have strongly maintained the wish for price stability and an increase in borrowing costs next month could have a negative effect on the broader economy.

The Dollar weakened generally yesterday as a government report showed that U.S consumer confidence had dropped, while house prices plummeted in April and reduced the prospect of a U.S interest rate hike today. However, the U.S service industries account for more than two thirds of GDP and while the worst housing slump in nearly 17-years combined with rising unemployment and higher food and fuel prices means that spending is unlikely to lift the economy out of possible recession. The accompanying statement and tone from the Fed monetary committee will be closely watched for their concerns on inflation.

Michael Ince

Archive News

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