mpc.theyserveforyou.com

mpc: 5 The most significant development in foreign exchange markets had been the appreciation of the US dollar since early January. Options prices suggested that the implied volatility of major bilateral exchange rates had dropped but that depreciation of the US dollar was still considered more likely than appreciation. In the view of some outside economists, analysis of the US current account deficit implied that a substantial real dollar depreciation was still required in the longer term. The sterling effective exchange rate index (ERI) had risen by about 1½% on the month and, as a result, the February forecast started from a baseline ERI around 0.8% higher than in November. However, much of the depreciation between August and November last year had been sustained. The implied volatility of sterling had remained low.