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Posted June 16th, 2008 by Charles Purdy

Weekly € rates and comments – week commencing 16th June 2008

 
 

Sterling continues to be “steady as she goes”. Over the last few weeks there has been little downward movement which suggests that sterling has found a base from which it may strengthen. The only worry is if we have another shock such as a Northern Rock. UK inflation is the major concern. Not just here in the UK but worldwide. There is even talk that the Bank of England may have to increase UK interest rates sometime soon as a counter to UK inflation. I must admit my feeling is that this is unlikely given the parlous state of the UK economy but the BOE might be “forced” to do a one off increase of 0.25%. I suspect “more steady as she goes” until we see a pick up in the UK economy.

 

The € has lost a bit of ground against sterling and sits at €1.270/£1 inter bank and against the US$. This is on the back of rhetoric from both sides of the Atlantic with the US talking up the US$ and Euro land talking down the €. This included the European Central Bank trying to make it clear that we will not see a raft of Euro land interest rate increases in the coming months, in fact, probably just one.  This rhetoric has been successful in the short term and it has to be remembered that Euro land does have some significant problems of its own with some areas suffering very badly from the strong €.

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