Versus £ Sterling

US Federal Reserve Chairman Greenspan could not have made it clearer that, to address the current account deficit, further US$ weakness is inevitable. When Greenspan talks his currency down, the market usually takes the hint. The $ has already fallen hard but is likely to weaken further in the New Year.

‘Cable’ (US$/£) is usually firm in the 4^th Quarter as FTSE350 companies repatriate their US$ earnings for their year end. However do not expect a prolonged counter-trend.

The futures market forecasts relative strength for the €uro. The Yen has also strengthened significantly, and the Japanese authorities have consistently stated that they are prepared to act ‘decisively’ if exchange rates move out of line with ‘fundamentals’: however this declaration may not have the impact that Greenspan’s has.

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