Given the recent spate of central bank rate cuts and further liquidity lines offered by policy heads, it seems that credit markets are becoming more confident. This has led to the three month dollar Libor rate declining a whopping 23 basis points to 3.19 percent. The deduction is the 14th straight decrease and is proof positive that lenders may finally be relaxing stringent rules to both institutional and commercial prospects. The overnight rate plunged 41 basis points to under 1 percent. Incidentally, the decline may also present opportunities for other currencies, dampening what the market has been seeing as massive US dollar strength. Since the beginning, as Libor and other rates and spreads were bid higher, market participants have been buying US dollars. However, as credit markets now become more relaxed, the likelihood of a reversal in these positions is looking increasingly probable. This has sparked at least a temporary rally in both British Pound and Euro in the overnight session. Sterling is now higher by 109 pips at 1.6476 as euro trades at 1.3042, the first time above 1.3000 since last week.

Tags: Euro, libor, Pound Sterling

This entry was posted on Thursday, October 30th, 2008 at 9:38 am and is filed under British Pound, Currency Trading, Euro. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.