Weekly Financial Markets Review by Lloyds TSB

Apart from Barack Obama’s clear win in the US presidential elections, widespread interest rate cuts – by the Bank of England, the ECB, the Danish Central Bank, the Swiss National Bank and the Reserve Bank of Australia – provided focus for financial markets.

Apart from Barack Obama’s clear win in the US presidential elections, widespread interest rate cuts – by the Bank of England, the ECB, the Danish Central Bank, the Swiss National Bank and the Reserve Bank of Australia – provided focus for financial markets. Sterling spiked to near 1.25 against the euro and broke below 1.60 against the dollar on the surprise of a 1.5% cut in UK base rates
to 3%, their lowest level since 1955 as the cut was initially perceived as a positive, but on Friday hit a weekly low of around 1.2206 against the euro and 1.5535 to the US$ as the interest rate reduction was not seen to be enough. €/$ peaked at 1.3116 following the release of a bleak US ISM non-manufacturing survey for October, but ended the week at 1.2767 as a comparatively modest ECB interest rate cut of 0.5% failed to instil confidence in the flagging eurozone economy.

The yen benefited from declining investor appetite for carry trades as Asian stocks continued to fall, appreciating against the dollar and sterling to end at 98.01 and 154.42, respectively. The Swiss franc depreciated against the euro, which peaked at 1.5172 mid-week.

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