Seemingly poised to breach any major psychological threshold, the pound surged to yet another 26-year peak of $2.0548 versus the greenback in early New York action. After the release of the Bank of England MPC minutes showing a 6-3 vote in favor of higher rates, cable ran into slight selling pressure after some construed the text as more dovish then forecasted.
UK Headlines:
Bank of England Minutes
The minutes of the Bank of England?s July policy meeting reflected a 6-3 vote to raise rates to 5.75 percent, signaling that the central bank may not be as quick to increase rates to 6.00 percent and instead wait until later in the year.
http://www.bankofengland.co.uk/publications/minutes/mpc/pdf/2007/mpc0707.pdf
-Source: BankofEngland.co.uk
Bernanke Remarks Add to Wall St Gloom
Wall Street was roiled today by a combination of factors. These included disappointing earnings and guidance, renewed worries over financials and cautious remarks on the outlook for the economy from Ben Bernanke, the US Federal Reserve chairman.
http://www.ft.com/cms/s/52016452-34ac-11dc-8c78-0000779fd2ac.html
-Source: Financial Times
Pound Rises to Highest in 26 Years on Rate Advantage Over US
The pound rose to a 26-year high against the dollar on speculation the Bank of England will lift interest rates later this year as losses on US subprime mortgages prompt the Federal Reserve to stay on hold.
http://bloomberg.com/apps/news?pid=20601083&sid=ajty72PH.iXM&refer=currency#-Source: Bloomberg
UK Market Activity:
Currency Markets: GBP
Seemingly poised to breach any major psychological threshold, the pound surged to yet another 26-year peak of $2.0548 versus the greenback in early New York action. After the release of the Bank of England MPC minutes showing a 6-3 vote in favor of higher rates, cable ran into slight selling pressure after some construed the text as more dovish then forecasted. However, sterling quickly regained its steam after market participants began to examine the MPC?s balance of risks to the outlook of inflation, including “the impact of stronger demand growth on companies? prices, the evolution of inflation expectations, prospects for energy and import prices; and the degree of spare capacity in the economy.” Following the release of BoE minutes, analysts contend that their major focus going forward will be the central bank?s quarterly inflation report due in August.
Equity Markets: FTSE 100
Leading London equities slipped for another session as a weak dollar and ongoing subprime woes weaken stocks. The benchmark FTSE 100 retreated 1.38 percent to 6567.10 hurt by index laggards Tate & Lyle and hedge fund Man Group Plc. Shares of the Splenda producer fell 3.5 percent to 579 pence as the company announced a sale of its starch unit to the tune of a 20-million pound loss. The world?s largest publicly traded hedge fund, The Man Group also dragged the index lower as communications as performance figures show that it?s Diversified Futures Fund dropped 0.5 percent in the week of July 16th.
Fixed-Income Markets: 10-Year Long Gilt
Global yields eased across the board in the New York afternoon as Fed Governor Ben Bernanke begins the two-day Humphrey Hawkins Testimony in front of the House and Senate Banking Committees. Analysts see a less hawkish tone used by the Bernanke and contribute this to the fall in yields. Yields on the ten-year gilt trade down 7bp at 5.406 percent.
