Euro:

European Central Bank (ECB) member Axel Weber commented that the European inflation outlook was
alarming and called for vigilance, increasing interest rate rise speculation.
Meanwhile traders are still expecting a rate hike in December following on from ECB President Trichet’s
hawkish comments on Thursday.

Pound:

Investors are still looking for the Bank of England to raise rates to 5.0% on Thursday. Today we see
the release of the British Retail Consortium high street sale figures for October. A dip is expected after
the weak distributive trades survey.
Meanwhile the FTSE is looking for a good start after Marks & Spencer post a half year profit rise of 32%

General News:

• China’s foreign exchange reserves top $1,000bn for the first time, growing at a rate of $30m an
hour thanks to the differential between imports and exports. This puts the spotlight on the renminbi
with many foreign investors seeing it as deeply undervalued.
• Oil prices ticked up as investors digested the news that OPEC are warning of further production
cuts next month. Oil had traded down as stockpiles had grown. This morning oil prices steadied
at $60.02 per barrel.
• In Australia investors are waiting for the Reserve Bank of Australia to lift the cash rate by 25
basis points to 6.25% tomorrow.

GB POUNDS/ USD 1.9037
GB POUNDS / EURO 1.4923
EUR/USD 1.2756
GBP/JPY 224.25
GBP/AUD 2.4615
GBP/NZD 2.8367
GBP/ZAR 13.9135
GBP/CHF 2.3834
GBP/CAD 2.1446
GBP/SGD 2.9749
GBP/THB 69.785
GBP/HKD 14.8214

Wednesday 8/11/2006
• Dollar sent tumbling by Fed official speech
• Democrats seize control of House of Representatives
• Reserve bank of Australia raises rates
• German trade surplus rises more than expected
• Sterling continues to firm ahead of BoE
• Oil tumbles on fund selling

US Dollar:
The dollar took another hit yesterday following a speech from the Fed’s Yellen who said that some
countries with excess savings may choose to invest less money in the US. This should have come as no
surprise to the market as Alan Greenspan, former Federal Reserve chairman, warned of central bank
diversification several times in recent months.
Losses were however pegged back as Chicago Reserve Bank president Moskow reiterated that inflation
risks were still skewed to the upside and that ‘additional firming of policy may yet be necessary’.
Elsewhere in the US the Democratic party won control of the House of Representatives-the first time in
12 years. The Senate however remains too close to call.

Euro:
The German trade surplus numbers came out higher than expected at €15.2million helped by a sharp
rise in exports.
The Euro looks to be fairly stable as the markets price in a December rate hike.

Pound:
Sterling continues to look strong ahead of tomorrow’s Bank of England interest rate meeting where
analysts are expecting a 0.25% rate hike. All eyes will be on any additional comments for clues as to
future actions of the Monetary Policy Committee
Meanwhile the National Institute of Economics and Social Research issued an upbeat forecast of the UK
economy, estimating that the economy grew at a quarterly rate of 0.7%.
Stocks look set for a rocky opening as news of President Bush’s poor show in the US mid-terms hits the
markets.

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