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Posted February 4th, 2008 by Charles Purdy

Weekly € rates and comments – week commencing 4th February 2008


Sterling had been doing okay until Friday of last week when it lost ground against most currencies. It seems to have been a culmination of the weeks woes; bad housing figures, inflation forecast to be over 3% [target is 2%] plus the fact that the market expects the Bank of England to cut UK interest rates this week. The BOE have a very difficult job with greater than targeted inflation forecast countered by the fear of recession with, seemingly, the only tool at the BOE’s disposal interest rates. We wait to see if this weakness continues this week as we approach the BOE meeting on Thursday and the announcement on interest rates.


The view on the € is still positive and it sits at €1.331/£1. The European Central Bank is expected to keep Euro land interest rates on hold as it fights inflation. Euro lands economic position is viewed as being strong especially when compared to the UK and the US. I still have difficulty being convinced that this is the case for all of Euro land but for the short term I see very little to shake this widely held belief.



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