Last week we saw investors liquidating assets across all markets and investing into the relative safety of the U.S dollar, increasing the strength of the dollar. On Friday the $700 billion bailout plan was passed by congress but the fear of a global recession meant that the bailout seemed too late to save other markets around the world.

Sterling was lifted early against the dollar amid efforts by the British Treasury to revive the ailing economy and injected much needed capital into the country’s largest banks. Royal Bank of Scotland said in a statement it will boost its capital by 20 billion pounds, including the UK government taking 5 billion pounds in preference shares and 15 billion pounds underwritten by the government.

The dollar is benefiting from the turmoil experienced in other markets, this trend may continue if the G7 or G20 cannot devise a solid plan to deal with the current financial mess, thus Cable could continue to fall in the short term.

In conjunction with other major central banks, the BoE cut interest rates to 4.5% on Wednesday continuing the plan to cut rates gradually. We should see more Sterling weakness in the short term. For those looking to sell their U.S dollars and buy Sterling we remain on the same stance that it may be advisable to do so while the market remains in the low 1.70’s. For those looking to buy dollars you may want to consider speaking to your currency trader at FCG regarding our stop-loss and limit options.