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Posted June 23rd, 2008 by Charles Purdy

Weekly € rates and comments – week commencing 23rd June 2008


Sterling maintained its “steady as she goes” stance although there have been a few waves along the way. First was the open letter from the Bank of England to the Government explaining why inflation was over 3% when the target was 2%. The problems are that the main factors affecting inflation, energy and food costs, are outside the BOE’s control while at the same time the UK economy is suffering. Therefore trying to bring UK inflation under control by significantly raising UK interest rates is not really an option. Then the minutes of the last BOE meeting were released which showed that one member of the committee had voted to reduce UK interest rates. Then the UK retail figures for May were released which showed a 3.5% increase against a forecast fall which was much higher than expected. So by the end of the week we seemed to be back to where we started which is reflected in most of the exchange rates.


No significant news to affect the € last week and it sits at €1.266/£1 inter bank. The major plus that Euro land has enjoyed recently is that in Germany it has a highly developed and efficient industrial power house and, apart from places like Spain and Ireland, house prices are not too high. This week we will see a lot of economic information which will give us a clearer feel as to the likely direction of Euro land interest rates. Currently the market is expecting them to be increased.

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