The Usd traded slightly higher in European Session on very light volume. Eurusd dropped sharply in Asian trading falling from 1.4722 to 1.4640 while UsdJpy slipped from 108.57 to 107.57. Crude prices has continued to slide as the risk that Hurricane Gustav would disrupted oil & gas supplies have subsided. WTI crude dropped sharply from $117.19bbl to $114.34bbl. However with Gustav expected to hit land shortly anything can happen and markets are clearly on edge. Asian stock markets traded lower and European equity indexes are not fairing much better. US markets are closed for Holiday.
Over the weekend Chancellor stated that the UK economy faced the worst downturn for 60 years, further weighing on the in the UK and GBP. In addition, this week will see the BoE MPC rate decision and a number of critical data releases. We expect that BoE to hold rates steady and expect the next move will be down.
In Europe, another fall in German retail sales adds to the evidence that regional economy activity is clearly deteriorating. However, the engine of Euro Zone growth continues to perform better than Spain & Italy, where the industrial surveys indicate sharp drop in production.
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