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Posted August 16th, 2010 by Charles Purdy

EUR/GBP Rate & Comments for 16th August 2010

EUR/GBP – 1.216

It was an interesting week last week for sterling after the Bank of England’s quarterly inflation report gave a downbeat assessment of the UK’s prospects over the next two years. After a lot of positive sentiment following the new coalition government and the emergency budget over the last 3 months, the Bank of England’s Monetary Policy Committee put a dampener on things by slashing their growth forecasts and inflation expectations. Sterling suffered against the US dollar as a result and many are expecting sterling to hit $1.55/£1 or lower in the next few weeks. Sterling performed well against the euro after concerns over euro zone sovereign debt hurt the single currency. The big data out this week in the UK is the release of the minutes of the Bank of England’s most recent meeting which, given the tone of the inflation report, could add to sterling’s recent decline. Housing data has shown that house prices dropped by 1.7% in August. This is the largest decline in 8 months, so ensure you don’t miss out by calling in for a live exchange rate.

In the euro zone, German GDP came in much stronger than expected last week posting figures of 2.2% against an expectation of 1.3% initially boosting the euro. However, towards the back end of the week, a poor Italian bond auction left the euro struggling. Demand was a lot lower than expected for the Italian debt, and as a result, investors became concerned over the risk of sovereign default in the region and as a result the euro fell to a 6 week low against sterling. Out later today, there is year on year CPI inflation data, which is expected to show an increase of 1.7%. Call in now to speak to a trader about your risk management strategies.

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