Pound to US Dollar fell in a straight line from 1.4900 on Sunday night to 1.3915

Foreign Exchange Outlook : The US dollar exchange rate resumed a strong rise across the board as bank and political crises erupted in the UK and Europe. The euro exchange rate fell yesterday from the high after the open Sunday night at 1.3386 to 1.3055 by the end of the day yesterday in the US, which saw hardly any trading since the banks were closed for the Martin Luther King holiday.

Overnight the euro exchange rate plunged right out of the gate in early Asian trading to 1.2986 and thence to a new low of 1.2919 after Europe came in around 3 am ET. That’s 467 points in about 30 hours. The euro rate is bouncing to 1.2954 at 7 am today but it’s not hard to read the chart—a new phase of the downtrend has started. The euro exchange rate has already retraced more than 62% of the recent upmove and talk will soon begin again of a 100% retracement of the move up from the Oct low at 1.2329.

Pound to US Dollar fell in a straight line from 1.4900 on Sunday night to 1.3915 - almost 1000 points.

Holy cow!

It’s the lowest level since 2001, on renewed disarray in the UK financial sector, with Royal Bank of Scotland needing government rescue on Monday and stocks, especially Lloyd’s, down over 30% today. The government is injecting capital into RBS but an analyst told the FT "The further losses from the combination of deflation and deleveraging will consume these additional funds, leaving equity shareholders at risk of further dilution."

The only currency holding steady is the dollar to Japanese yen, which has been hovering in the low 90's since Sunday night. Euro to Japanese yen and pound to Jpanese yen are both weaker, however. See the charts.

It seems strange to see the pound soft against the yen when the UK still has a yield advantage and a more activist central bank and treasury than Japan during its own lost decade.

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Barbara Rockefeller
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