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Posted August 12th, 2007 by Charles Purdy

Weekly Euro Rates and Comments – Week Commencing 13th August 2007

Sterling had a strange start to last week losing a cent and half against the Euro very first thing Monday morning. The explanations as to why the sudden movement happened have been somewhat limited especially given the lack of sterling negative news over the weekend. At the same time, there was a rapid decline in the US$ against the Euro. There has been a partial recovery in sterling during the course of the week but it would seem that sterling is now being identified as a high risk rather than a safe haven asset and, as such, is moving in line with the US$ dollar against the Euro. The flight to safety has been brought about by high volatility in the equity markets and the credit crunch in the debt market which are making investors very nervous.


The Euro is currently sitting at €1.478/£1. It was only a couple of weeks ago that the Euro pushed up to towards €1.50. At one stage, at the start of last week, we were close to €1.465. The ECB has made it clear that interest rates will be increased next month by 0.25%. Even though the Euro is very strong against the US$, the German economy is still growing and, as the economic powerhouse of Europe, it means that Euro land is on the up. The strengthening of the Euro against the US$ and sterling was much quicker than anyone could have forecast and we wait to see if it can be sustained.



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