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Posted October 19th, 2009 by Charles Purdy

Weekly € rates and comments – week commencing 19th October 2009

A better week for sterling last week. It started off badly with sterling hitting a six month low against the euro. This was on the back of the rate of inflation for September being under expectations at 1.1% [August 1.6%]. I must admit I do wonder why there is inflation rather than deflation but I suspect sterling’s weakness is a significant factor increasing the cost of energy and food imports. But then sterling started to strengthen as members of the Bank of England’s monetary policy committee talked up the success of their programme of quantitative easing. Firstly the impression was given that the BoE would not increase the programme in the short term and then it was highlighted that the programme had been effective in getting the economy moving. They also acknowledged the need to remove this huge stimulus before it leads to inflation exceeding the 2% target. Also economic data on house prices and unemployment were better than expected and sterling had a strong end to the week. This week we have the gross domestic product figures for the third quarter. The expectation/hope is that we will see the UK economy growing albeit only just. We also have retails sales figures out for September with an expected increase of 0.5%.



The euro, which sits at €1.090/£1, continued to advance against the US$ but as noted above lost ground against sterling. Nothing new to report on the economic data front. The European Central Bank still view the current euro interest rate as appropriate but are conscious that the euros strength is having a negative effect on exports and as such will be detrimental to euro lands ongoing recovery. This week we have a raft of economic data released including euro land producer prices, initial producing prices and industrial order information for August.


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