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Posted October 6th, 2008 by Charles Purdy

Weekly € rates and comments – week commencing 6th October 2008

Sterling left it late in the week but gained sharply against the euro on Friday. The pound surged to its highest levels for some months largely thanks to an injection of £40bn from the Bank of England to help with the liquidity issues which are causing so much turmoil in the UK financial sector. There will be great interest to see what the Bank of England will do with their decision on UK interest rates this week as recent speculation has suggested a cut, or even a series of cuts, may well be imminent.

 

The euro, currently at 1.289/£1, fell throughout last week against both sterling and the US$. Comments from JC Trichet of the European Central Bank suggesting that inflation was no-longer as much of a concern as the slow-down in business growth and supported the belief that interest rates will by cut during the 1st quarter of 2009, if not sooner. This may have come as no massive surprise but will surely weaken the euro in the coming months which will hopefully help a troubled German export industry struggling with an over-priced euro.

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