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:

Wednesday October 24th 2007

By Alex Robertson - Regional Development Executive, Foreign Currency Direct

Sterling £

The pound strengthened on Tuesday as an upbeat speech from Bank of England rate setter Kate Barker offset a weak UK manufacturing survey. UK factory orders fell in October, a survey from the Confederation of British Industry (CBI) suggests.
However, the broader picture is that orders grew strongly over the last three months. The CBI said there was little evidence that weakness in financial markets was having an effect on manufacturers. This data will fuel arguments about whether or not the Bank of England should cut interest rates.

Barker in her speech stressed that although the risks to the UK economy are tilted to the downside, there is little evidence that the recent credit crunch will have a major impact on household consumption.

“Even if there were a major weakening in the housing market, the response of household consumption may be muted, since it is not expected to be linked either to rising unemployment or deterioration in households’ income expectations,” she said.
Over the course of this year, Kate Barker has been perhaps the key swing voter on the Monetary Policy Committee,” said Malcolm Barr, chief U.K. economist at JPMorgan Chase & Co., who used to work at the Bank of England. Barker’s remarks suggest she may favour gathering more evidence about the economy before lowering interest rates from the current six-year high.

Sterling dipped following the report, but has since clawed back earlier gains since the speech as it boosted investor’s enthusiasm for currencies with relatively high yields such as the pound.

The US Dollar $

The U.S. economy still faces pressure from a drawn-out housing-market slowdown but will “probably not” slip into recession as a result, former Federal Reserve Chairman Alan Greenspan said on Tuesday. In a broad-ranging question-and-answer session Greenspan said chances of a recession are “less than 50-50.”

This was compounded by a speech made by Federal Reserve Bank of Chicago President Charles L. Evans on the same day. Evans, who votes on interest rates this year, stressed the importance of “risk management” in determining Fed policy and noted that “uncertainty” about the impact of financial volatility has increased in the past week. Some anticipate the Fed will lower rates for a second time on Oct. 31, and Evans didn’t rebuff those expectations.

Canada’s Dollar Rises

Canada’s dollar rose to a 33-year high on Tuesday, the currency extended gains after the government report showed Canadian retail sales rose 0.7 percent in August, faster than economists expected, led by new car dealers.

This was supported by Investors buying currencies of commodity exporters, such as Canada. A commodity is something for which there is demand and generally, these are basic resources. Canada is considered to be a major commodity exporter due to the fact it is the second largest oil exporter.

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 23rd 2007

By Tom Higham - Trading Supervisor - Foreign Currency Direct

Tuesdays Trading

Sterling lost ground against a basket of major currencies yesterday as cautious investors continued to unwind their carry trades. As some of our regular readers will be aware a carry trade is where low yielding currencies such as the Yen are sold for higher yielding currencies such as Sterling and the Kiwi and Aussie dollars. While there was little economic data out yesterday the unwinding of these carry trades had a more pronounced effect on the currency market. By close of business Sterling was down over half a cent against the Euro and Cyprus pound and by three quarters of a cent against the US dollar.

In Europe

The euro zone’s trade surplus (which measures an economy’s exports compared with its imports) with the rest of the world rose sharply in June, beating economist’s expectations, and suggesting that the region’s robust economic growth is continuing. European statistics agency, Eurostat stated the 13 countries that share the euro had a surplus of €7.8 billion in their trade in goods with the rest of the world in June, far greater than the €1.7 billion surplus registered in May and more than the June 2006 surplus of €1.6 billion.

The figures were much stronger than the €3.0 billion surplus that economists had predicted in a Dow Jones Newswires survey and may indicate that the region’s period of economic growth is set to continue.

This continued to boost expectations that there will be an interest rate hike in the Euro zone in the short term with the majority of analyst’s opinions stating it will be September. This led to the Euro gaining strength across the board.

Across the pond…

A statement from one of the key US senators yesterday said that the Federal Reserve had pledged to do all it can to ease the credit squeeze fears. Senate Banking Committee Chairman Christopher Dodd was speaking after he met with Fed boss Ben Bernanke and Treasury Secretary Henry Paulson. This led to a rise in US shares however many analysts believe the volatility is set to continue.

Adam Neal, from CMC Markets, said speculation was building that the Federal Reserve would cut its main interest rate, adding: “This would likely provide stocks with some further momentum, but until we see the actual relevant announcement this thinking will do little to eliminate any volatility.” On Friday the Fed reduced the rate it applies to loans made between banks to 5.75% from 6.25%. Officially, the Federal Reserve is not scheduled to meet until 18 September. Some analysts argue that until then market jitters will remain.

Monday October 15th 2007

By Gavin Beale - Senior Executive Dealer

Last Week in Brief

Sterling strengthened on Friday as unexpectedly positive US economic data bolstered the global economy, supporting the Pound.

U.S. retail sales rose more than expected, supporting the view that the Federal Reserve will not cut interest rates when it meets later this month.

“The U.S. economy looks to be in a healthier position than many thought and this benefits the global economy,” said Kamal Sharma, currency strategist at Bank of America. “This benefits the pound as the UK economy is very tied into global growth.”

In the early afternoon on Friday, the pound was up 0.1%t versus the dollar and gained 0.2% against the Euro. This short-term strength for the Pound came as a welcome let-up in what seems to be a time where the UK has been experiencing an economic monsoon season.

We still see favorable rates as Sterling holders, but don’t let yourself get caught watching, this is the lowest that Sterling has been against the Euro since May 2005 (as the arrow in the graph below illustrates) and the highest we’ve seen against the US Dollar in nearly 26 years.

The question you need to ask yourself is whether you believe the gamble of the market improving further, outweighs the risk of it dropping further?

The UK, with the highest interest rates in the ‘Group of Seven nations’ (comprising; Canada, France, Germany, Italy, Japan, Russia, USA and UK…now known as the G8 after Russia formally joined in 1997) at 5.75 percent, gains from the carry trade where investors borrow low-yielding currencies like the Yen to fund purchases of higher yielding assets like Sterling. Being part of the G7 and having the highest interest rate in the group means that investors are inclined to invest here partly for profitability reason and security as well.

As an overseas property purchaser, you should certainly be concerned at recent fluctuations of Sterling and the possibility of further movements; after all, the investment of speculators money and the effect that has on the economy can severely alter how far your Sterling will get you when converting to another currency.

Market expectations for UK rate cuts fell earlier in the week when Bank of England Governor Mervyn King said Britain’s economy would need to slow over the coming year to keep inflation risks at bay.

Data released on Thursday showing UK house prices fell has revived expectations that rates may be cut. Investors will look to data this week’ for more clues on further rate movements.

What to expect this week?

There are many important economic events scheduled for this week, with some key measures of inflation due.

Let’s take a look at those likely to move the markets:

- Today, there are no major economic events scheduled, however taking a look at Thursdays data from the Royal Institute of Chartered Surveyors (which indicated the UK house prices are falling at their fastest pace in two years), Sterling is likely to see further volatility following this mornings release of Rightmove’s UK house price index.

- On Tuesday, we start the day with UK’s CPI and the Euro Zone CPI. This busy day will finish with the NAHB (National Association of Home Builders) Housing Index release; this is for the American housing market and will show if the growth rate of the housing market affects the USD volatility.

- Wednesday sees the minutes from the BoE rate decision meeting. Next is the US CPI.

- On Thursday, the UK releases retail sales figures, providing further speculation as to where next months interest rate decision will be headed.

- On Friday, Germany starts with the PPI, UK continues with the GDP figures and finally we have a testimony by Ben Bernanke in an economic forum… the biggest event out of the US.

This week is a very busy time with a mass of very important market data due. It is inevitable that Sterling will have some movement on the back of it, what is not certain is which way it will go.

Short-term currency requirements are at risk whilst the market is pointing in multiple directions whilst the longer term appears even less clear.

By Tom Arnold - Senior Executive Dealer

Thursday’s Trading

Sterling slipped to its lowest level in nearly two weeks against a basket of major currencies on Thursday, after data showed UK house prices fell at their fastest pace in two years, in the three months to September, and the outlook for sales was its weakest in 4.5 years, as interest rate worries put people off investing in property.
“The combination of rising interest rates, the introduction of HIPs and volatility in the financial markets resulting in tightening of lending criteria, has certainly affected the confidence of buyers and sellers.” said RICS spokesman Jeremy Leaf.

The data from the Royal Institute of Chartered Surveyors was the latest in a line of soft news from Britain’s housing market, and this has rekindled talk of a UK interest rate cut.

Sterling had rallied earlier this week after expectations of a near-term UK interest rate cut were cooled, when the BoE Governor Mervyn King, said Britain’s economy would need to slow over the coming year to keep inflation risks at bay.

It was not all bad news for the UK economy however, with the pound briefly picking up after data from the British Chamber of Commerce showed, in the third quarter, UK manufacturers enjoyed the strongest demand for their goods in nearly two decades, taking the percentage of firms working at full capacity to a 10 year high.

This data, while very positive, was not a strong enough indication of inflationary pressures to halt the slide in Sterling, brought about by the RICS survey though, and the Pound finished the day down 0.4% against the US Dollar, 0.9% against the Euro, 0.95% against the Cypriot Pound.

Note from offshore-savings-accounts.org.uk: None of the information contained in this website constitutes, nor should be construed as financial advice.

This is a really interesting site to keep an eye on - not least because as they trade a number of hours ahead of the UK market, you get an insight ‘before the doors open’. And even though they are Australia-based, they offer commentary on all the major currencies.

Thursday, October 11, 2007 - Market Commentary - Ozforex

:: Australian Dollar: As expected Australian Consumer Confidence fell 0.3% in October to a seasonally adjusted 115.3 according to the Westpac and Melbourne institute survey. Yesterday’s announcement kept a lid on the Aussie dollar around the 90 cent mark with resistance at 0.9010 proving too strong. Offshore markets took the Aussie lower with demand for the Greenback in NY trading taking the AUD/USD to a low of 0.8940. Continued AUD/JPY buying however triggered an immediate bounce back to 0.8980 ahead of today’s local September Labour data release.

More to be found at the url above.

As always, just a note from us at offshore savings - the information on this site is not intended to and does not comprise financial advice.

Wednesday October 10th 2007

By Robin Haynes - Director

Pound drifts after pre-budget speech
The Pound fell slightly against a basket of currencies yesterday as Chancellor Alistair Darling delivered his pre-budget speech to Parliament.

GBP yesterday:
Against USD: +0.05%
Against EUR: - 0.35%
Against CYP: - 0.35%
Against NZD: - 0.19%
Against AUD: - 0.64%
Against ZAR: - 0.05%
Against THB: -0.45%
Against CAD: - 0.26%
Against DKK: -0.35%

(Note from offshore-savings-accounts.com: None of the information contained in this website constitutes, nor should be construed as financial advice.)

Tuesday October 9th 2007

By Edward J Bianco - Financial Controller

UK

It is likely the recent hiatus enjoyed by sterling whilst the dollar languished is soon to come to an end, once again UK domestic and US global factors are at the pre-eminent issues for of our clients trading, whatever the currency.

Just as the market and people’s focus appeared to be drifting from old news it looks increasingly that Northern Rock will remain the hot potato over the coming weeks. Northern Rock’s weekly accounts show that the Bank of England loans have topped an incredible £10bn to date. Whilst an unelected Gordon Brown remains vulnerable in any economics debate the uncertainty surrounding the country’s mid term political leadership is also likely to erode sterling value. At present the government appears to be trying to carry favour by making public ministers attempts at strengthen the protection available to private individuals, and their bank balances, by raising the automatic repayment threshold.

It remains of considerable concern that theses headline grabbing efforts whilst populist may well be naively conceived. After-all should a lender responsible for one fifth of the UK’s mortgages become insolvent the burden placed on the Bank of England to support their poor short-termist borrowing practices would be considerable and relief funds must be released from elsewhere. More importantly Northern Rock is not affected in isolation so the factors which may lead to their decline will also be affecting others and the Government will find it difficult not to be consistent in its application of any financial guarantees. As Northern Rock smoulders in the back ground the pessimists will be looking to seek the root of future fires. Should the position worsen further we may expect to see sterling lose considerable value over the coming months.

Prospects of an interest rate rise to improve sterling strength and counter negative news looked to have diminished further as the Office for National Statistics stated input prices for the year to September stood at an inflation busting 6.45% putting pressure on UK manufacturing and slowing the economy as a whole. ”These figures are a touch stronger than expected and there is nothing here that suggests the Bank of England will cut rates in November,” said George Buckley, an economist at Deutsche Bank. In support of this news the National Institute of Economic and Social Research said UK GDP grew by a slowing 0.7% in quarter 3 compared to 0.8% in quarter 2.

This is in contrast to retail sales figures for the year to September which show growth of 3% according to the British Retail Consortium.

USD

The popular saying remains that if America sneezes the UK catches a cold which makes it highly likely that whilst both currencies may decline sterling may fall further and faster. So just how bad is it currently in the US well one indicator it may be time to reach for the Beechams Cold Capsules is homelessness in the US, Julia Kehoe, commissioner of the State Department of Transitional Assistance has said of the level of homelessness in the US , “I think what we are seeing here is a perfect storm,”

Initial optimism that US employment figures weren’t as bad as expected have been dampened on further investigation, it appears that the US governments own recruiting may well have been to blame for a significant part of the uplift. To add further pressure the cost of Brent Crude dropped yesterday by over 2% a barrel as investors remain concerned that the global credit crunch will lead to a deep rooted recession and that the US National Hurricane Centre said on Friday it does not expect any more tropical cyclones or hurricanes this season to restrict oil supplies. The news weighed on oil as it reduced the chances of future supply outages.

Euro Zone

Tilting at windmills the European Finance Ministers believe they have a solution to the crisis and it rests in the Far East. The G7 European Finance Ministers (for RGH – Canada, France, Germany, Italy, Japan, United Kingdom, United States of America) currently represented on rotation by Luxembourg’s Prime Minister and Finance Minister Jean-Claude Juncker believe that a world crisis can be averted if the the Chinese allow their currency, the Yuan to roam freely, currently it’s exchange rate is highly restricted. They beleve this would allow the dollar to regain significant strength which in turn is in the global market’s interest.

Note from offshore-savings-accounts.com: None of the information contained in this website constitutes, nor should be construed as financial advice.

Daily Press Brief. Monday October 8 2007. US Non-Farm Payrolls bring confusion. - Investors question reliability of employment data, - Holidays in Japan, US, Canada today

Good morning. At lunchtime on Friday it took ten minutes for the Pound to drop a cent against the Dollar and an hour for it to climb back up. The market spent the rest of the day scratching its head in bemusement. It was the US employment numbers that had everyone confused. After a loss of 4,000 jobs in August investors had been told to expect 100k new ones in the September figure. Some optimists thought there might be a few more than that. And indeed there were; Non-farm payrolls were up by 110k. In what should have been an even more important announcement the Bureau of Labor made a massive revision to the previous month’s data, turning the 4k loss into an 89k gain. Taken together it meant an aggregate increase of 203k jobs, double the expected number. It should have been good for the Dollar. For ten minutes it was good for the Dollar and then the doubts set in….

To read the full article please go to  http://www.moneycorp.com/press/brief

It’s an instant access online savings account called the eSaver offshore savings account and the rate is guaranteed to remain above the UK base rate until 31st December 2008. The new savings account can be opened easily online and can be accessed and managed 24 hours a day from anywhere in the world.

The eSaver sterling savings account requires no notice for withdrawals and the 6.50% interest rate includes a premium of 0.50% which is paid on the average balance when no more than 3 withdrawals have been made over the financial year.

So though it may not have the flexibility you might need for day to day transacting, it’s a great place for savings where you’re not going to need to dip into them regularly.

Thursday September 6th 2007

By David Jones - Executive Dealer

Bank of England Helps in The Credit Crunch

The bank of England has increased the amount of money banks can deposit with it and then use when they need overnight funding. The move could ease the rates banks are charging each other for short-term loans, which have soared on worries about risky investments. However these Libor rates remained high despite the intervention, the British Banking Association said.

The Bank of England’s move means that when banks need additional funds they will be able to draw on the extra money they are now effectively saving with the Bank of England, this could make them less reliant upon having to borrow extra funds from other commercial lenders on the so-called overnight borrowing markets, where the interest rates charged have recently been substantially above the Bank of England’s current 5.75% base rate.

The Bank of England has increased the amount of funds banks can deposit with it by 6% to £17.6bn, and said it was prepared to increase this by a further 25% if needed.

BBC Business Editor Robert Peston said that this is “big news”.

“In crude terms, the Bank of England is basically providing additional cheap finance to the banks to meet any short term requirements they might face,” he said.

An increase in the reserve requirement is in affect an increase in lending to banks at the base lending rate of 5.75%. It represents a significant increase in the liquidity of the banking system and relieves pressure on the banks to borrow at the higher penalty rate (Libor) of 6.75%.”

Data out Yesterday showed that UK services sector activity accelerated unexpectedly in August and housing data from HBOS Plc said the annual 3-month rate of house price inflation edged up to 11.4 percent in August.

The run of strong data appeared suggesting Britain’s economy was coping well with the market turmoil and may rise at a faster rate than previously thought in the third quarter, challenging many analysts’ view that BoE interest rates have likely peaked.

Before the BoE announces its rate decision at noon today, markets could glance at the 9.30am release of July industrial and manufacturing output numbers for further clues about the strength of the real economy.

Euro Zone Interest rate Decision

The European Central Bank is expected to leave eurozone interest rates unchanged at 4.0% today. Investors will be eager to hear ECB President Jean Claude Trichet’s comments on the outlook for monetary policy following the upheaval in financial markets.

Typically the ECB lets the market know at least a month in advance what they plan on doing with interest rates. This time however, Trichet and company will have traders guessing up to the last second. There are three potential outcomes of this much anticipated rate decision.  The first and the most unlikely is for the ECB to raise rates to 4.25%. This surprisingly hawkish move would be extremely positive for the Euro, the second scenario is for the ECB to leave rates at 4 percent, and use the words strong vigilance and add some other dovish comments that would allude to interest rates remaining unchanged for the remainder of the year. This would be extremely bearish for the Euro, The third scenario would be for the ECB to leave interest rates unchanged and either keep the words strong vigilance or other equally convoluted and slightly hawkish comments, which would leave the door open for further rate hikes and be only slightly bearish for the Euro.