Sunday 07 June 1998
"There's mounting evidence that the slowdown in the export sector is filtering through to the service sector, which should prevent another rate rise," said Eric Fishwick, an international economist at Nikko Europe.
The pound finished last week lower, at DM2.9015 compared with Monday's opening rate of DM2.9165. It rose as high as DM2.9278 after the rate increase.
The Bank of England raised its benchmark rate by a quarter-point to 7.50 per cent, the highest it's been since November 1992. Mr Fishwick said he expects the pound to hold at about DM2.90 this week, though he sees a decline to DM2.80 by the end of June as the economy slows at the same time as accelerating German growth fuels concern about a German interest rate increase.
The Bank of England cited February's rise in average earnings of 4.9 per cent, as prompting the rate increase. That's more than the economy can sustain without pushing inflation rates up, the central bank said.
"The rise in average earnings was exaggerated by one-off bonuses paid in February," said Keith Edmonds, chief currency analyst at IBJ International. "There's a risk of higher official rates, but I reckon it's about a 33 per cent chance because the underlying trend is for lower wages."
The pound lost ground against the dollar on Friday after the US saw higher than expected jobs growth in May, fuelling concern that the US Federal Reserve Board may raise interest rates when it meets on 1July.
The pound fell to $1.6363 from $1.6402 on Monday.
"We expect one more interest rate hike in the US of 25 basis points, which would lift the dollar to $1.80 against the pound in the days ahead of the meeting," said Michael Lewis, currency strategist at Deutsche Morgan Grenfell.
"We think the pound will fall to 2.85 against the mark over the next month as the German economy picks up steam."
The dollar rose to a seven-year high against the yen, climbing to just shy of Y140. "We're in a Goldilocks economy,'' said Joe Cambria, head of spot trading at Credit Suisse First Boston. "It's not too hot, not too cold. We're still in economic nirvana. We could see the dollar rise to 141 next week."
For the week, the dollar rose 0.65 per cent against the yen. "Traders are going to buy dollars until they're given a reason not to," said Ralph DelZenero, at First Chicago. "There's no reason to hold Japanese assets right now."
Copyright IOS & Bloomberg.
- 1 Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Weather bomb in pictures: Storms cuts power for tens of thousands – and snow is on the way
Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
Russell Brand was rendered speechless on Question Time by this man
Fury at Airbus after it hints the super-jumbo may be mothballed
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
Nigel Farage defends Kerry Smith 'ch***y' comment: 'If you are going for a Chinese, what do you say you’re going for?'
Nigel Farage's approval rating hits 'record low' as popularity suffers in wake of Ukip sex scandal
Pakistan school attack live: Taliban kill at least 132 children in 'horrifying' massacre
Sony hack: Angelina Jolie branded 'seriously out of her mind' in further embarrassing leaked email saga
Panic Saturday: 13 million Britons spend £1.2bn – while 13 million others across the country live in poverty unable to afford food
iJobs Money & Business
$200 - $350 per annum: Carlton Senior Appointments: Managing Producer Office...
$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...
Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...
Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...