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

Friday September 21st 2007

By Gavin Beale - Senior Executive Dealer

Pressure Mounts on Mervyn King and the Bank of England

This week has seen a massive slide in the value of Sterling after the Bank of England has made somewhat of a U-turn on its stance with regards to how the current crisis surrounding Credits and Northern Rock is best handled.

Having apparently been aware of Northern Rock credit problems since 14th August, Mervyn King has finally injected £10b into the money markets to alleviate the ‘credit crunch’, moving to change UK laws that have in the past prevented such an intervention.

Paddy Power Plc, Ireland's largest bookmaker, is taking bets on who will replace Bank of England Governor Mervyn King when he leaves the bank, odds are 13-8.

“Mervyn King's fortunes have changed faster than a Northern Rock bank statement,'' said Darren Haines, a spokesman for Paddy Power.

It seems that as confidence in King has diminished of late and next summer it is becoming increasingly unclear as to whether Mr. King will continue his role for a second term.

Yesterday Sterling slumped a further -0.42% against the Euro, -1.03% against the Canadian Dollar, -1.1% against the Aussie Dollar and -1.62% against the Kiwi Dollar.

Yet another highly turbulent day in a week that has seen Sterling lose a great deal of value as investor confidence is far from high.

Some major data releases yesterday showed that UK Retail Sales are up from 4.4% to 4.9% since last year, higher than expected.

Sterling was however up against the US Dollar by 0.34% even though the number of people filing first-time claims for state unemployment insurance decreased from 320,000 to 311,000 which is seen as positive news, given America’s current sub prime market issue.

Today’s most notable data release is the European Monetary Union PMI (Purchasing Managers Index) release, measuring business and overall economic conditions in the manufacturing sector. Expect results at 9.00am BST.