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Posted October 21st, 2007 by Charles Purdy

€ rates and comments – 22nd October 2007

Sterling is holding its own. The minutes of the last Bank of England meeting were released and the vote had been 8 to 1 to keep UK interest rates on hold. The credit crunch was obviously a concern but inflation is still a worry to the BOE. The last inflation figure of 1.8% was within the 2% target and we now wait for the next inflation report in November. New mortgages are slowing down as the UK housing market begins to slow.  Still difficult to see much upside for sterling short term.

 

The € is still benefiting from a positive flow of economic data and the “underperformance” of both sterling and the US$. The current inter bank rate is €1.436/£1 One problem that will ultimately have a major effect on the € is the appreciation of the € against the US$ which will make Euro lands exports less competitive than those from the US. The French continue to complain about the strong €. In the space of 18 months the € has gained 20% against the US$. How is Airbus able to compete with Boeing when Boeing have gained a 20% cost advantage doing nothing! So don’t assume that the € will continue to move in one direction only. Seems like a good time to bring funds to the UK.

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