Currency market updates - from Foreign Currency Direct (www.currencies.co.uk)

Monday September 10th 2007

By Robin Haynes - Director

Friday’s Summary

Friday’s key news was the monthly release of American “Non-Farm Payrolls” data – the main monthly indicator of the US labour market.

Usually, a smaller-than-expected number of jobs created leads to some short term dollar weakness and some opportunities to buy at cheaper levels.

This is excactly what we saw on Friday – analysts were expecting 118,000 jobs to have been created in August, but the figures released showed a decline of 4,000 jobs intstead. This was the first decline in employment posted since August 2003.

Friday afternoon therefore saw the GBP-USD exchange rate increasing around 1% or 2c, amidst calls for interest rate cuts in the USA next week to ease the credit crunch and kick start the economy again.

By the close of business the rate had steadied – any readers needing to buy dollars should be aware that this could well be a temporary opportunity to take advantage of some unexpected data by buying early this week. Don’t forget we can offer fixed exchange rates up to 2 years ahead if you don’t need your currency straight away.

ECB Expects Growth to Continue

European Central Bank Vice-President Lucas Papademos told journalists on Friday that the Eurozone’s growth prospects have not been affected by recent turmoil in the financial markets.

"The most likely outcome for medium-term growth remains the same," he said.

If he is to be believed, and “economic growth in the euro area remains favourable”, we could yet be in for further interest rate rises for the single currency.

This would be likely to make the euro more expensive – specially if UK interest rates are held steady which now looks much more likely than just a few weeks ago.

9/11 Anniversary

Tomorrow sees the 6th anniversary of the devastating terrorist attacks in New York and Washington. One plot for a repeat attack was reportedly foiled last week – and markets could be jittery for the next 2 days for fear of any further attempts.

Keep in touch with your FCD account manager to make sure your currency purchase is not adversely affected by any movements.

Overall Effect on GBP

Most analysts now expect the Pound to fall in the coming weeks and months. As Tim Clayton, economist at Investica, puts it: “The longer-term risk profile remains troubling for the UK currency."

Data this week

Today  – UK Industrial Production (9.30am)
Tuesday – USA Trade Balance (1.30pm)
Wednesday – New Zealand interest rate decision (10.00pm)
Thursday – Swiss National Bank interest rate decision (1.00pm)