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Money Market Update From Custom House February 19, 2007

Posted by liverpoolchamber in Custom House, News.

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Liverpool Chamber’s new e-newsletter service continues to grow. Over 1,100 people so far receive our monthly round up of business news from the Chamber and beyond. Sign up (via the above link) to up to get all the business news that matters as well as what’s happening at the Chamber.

Our newsletter is sponsored by Custom House. They are a leading global provider of foreign exchange services and payment solutions to businesses and individuals. Whether you’re making payments, receiving funds, or working to establishing a stable payment relationship with foreign businesses partners, they can provide custom solutions for your business needs.

Contact Ian Meyer on 07932 024 893 to find out more.

Read the Custom House weekly money market update by clicking on ‘more’.
In the currency markets this week –

The pound collapsed at the open of the London trade as the details of the MPC report to the UK Treasury spread across the City’s dealing desks. Although the MPC report touched on many familiar themes, stressing the upward risks to inflation, traders focused on one particular section that noted some GBP depreciation would “probably be necessary” given UK chronically high current account deficit. Over the past several  years, traders have blissfully ignored the structural problems surrounding the UK currency, but the recent explicit mention of these problems by the MPC triggered a slew of sell orders which were further exacerbated by relatively thin holiday trading. Sterling lost a full cent against the dollar and hitting a six-week low versus the euro. Of importance this week is the Bank of England minutes from the last meeting which will give an insight into future decisions.

The calendar in the Euro-zone was relatively subdued and the Euro’s  strength came from dollar’s weakness, rather than its own data. Both the Trade Balance and the ZEW missed estimates, but not by much. More importantly the EZ GDP was revised to 3.3% from its original estimate of 3.0%. It’s noted that although GDP is generally considered to be a backward looking indicator, the surprising strength of the release suggests that economic growth in the EZ remains quite vibrant and its momentum may carry over into this year. There is very little euro zone data out this week so trading is expected to be relatively range bound.

Higher-than-expected US trade balance deficit and the bigger than forecast draw in US inventories last Friday  suggest that the initial 3.5% estimate of US 4Q GDP will likely be revised downward. It fact it’s quite plausible that after final adjustments are made – EZ GDP will exceed US GDP for the third consecutive quarter. Little wonder then than German business confidence rose to its highest level since 1991 and EURUSD broke through the 1.3100 level. However USD gained 1c this morning due to comments from the MPC to the UK treasury. Important CPI inflationary numbers are due from the states on Wednesday.

Japanese Q4 GDP printed at 1.2% versus 0.9% projected as the Japanese economy grew at the fastest pace in 3 years. Fuelled by the longest corporate expansion in 30 years the Japan’s GDP expanded at a 4.8% annual rate – far better than consensus estimates of 3.8% growth. Furthermore nominal  prices climbed 5% – faster than even the headline GDP number. All of this of course stocked speculation that BOJ will now finally move on rates.


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