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

Note from offshore-savings-accounts.org.uk: None of the information contained in this website constitutes, nor should be construed as financial advice. This report comes directly from the team at Foreign Currency Direct and is intended for information only.

Highlights from:

Tuesday October 16th 2007

By Aidan Kilvington - Senior Executive Dealer

More Housing Market Negativity in UK

On Monday morning yet more evidence was released that the property market was taking a downturn as house price inflation levels were reported by yet another source as dropping after the interest rate increases over the last year.

The report, issued by the Department of Local Communities and Government (DLCG) stated that house prices rose by only 0.5% in August taking the average house price across the country to £219,528. However, the annual rate of price inflation fell from 12.4% to 11.4%

It also outlined that price inflation in London, which is one of the main drivers behind the UK price increases, has also declined from 19.1% in July to 17.4% in August. The report has suggested that now with fewer people taking out new mortgages, it seems that the drop is destined to continue.

This will add pressure to the BoE to look at interest rates and whether or not to reduce the cost of borrowing in order to spark growth again. This speculation can lead to exchange rates dropping off as the security of investor yields is uncertain. We are currently experiencing high levels of uncertainty in the UK markets and we have seen substantial movements over the course of a few hours over the last few weeks.

US Banks Pool Resources

Yesterday saw the USD weaken against both Sterling and the Euro as it was announced that three of the major banks are pooling funds in order to prevent investment funds dumping assets on the open market.

The fact that Citigroup, JP Morgan Chase and the Bank of America announced that they had set up the multi-billion dollar fund provided some slight confidence in risk and yield on the currency markets.

“It should be deemed as healthy, and correlated with all these risk preference trades” Said Neil Jones, head of hedge funds at Mizuho in London referring to the US banks announcement.