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Posted September 24th, 2010 by Charles Purdy

EUR/GBP Rate & Comments for 24th September 2010

EUR/GBP – 1.175Sterling rose against the euro yesterday as Euro zone data came in worse than expected and cast doubts over the validity of the region’s recovery. European Purchasing Manager’s data (which shows how much companies are buying) came in far worse than expected causing concerns that the business outlook for the region is looking poor. Sterling rose to 1.1799/£1 on the news and left Wednesday’s 4 month low behind. However, according to Spencer Dale (chief economist at the Bank of England), the UK faces “substantial headwinds” attributable to government spending cuts and tight lending conditions. This leaves a distinct possibility that the Bank of England will inject further money into the economy to stimulate growth. One question needs to be asked though – is the bank’s negative rhetoric a ploy to keep sterling weak and drive exports and a rebalancing of the UK economy? We shall have to wait and see… There is no data out today, so speak to a trader today to avoid missing out on sentiment based trading.

In the Euro zone, the euro had a poor day yesterday falling 0.6% against sterling and 0.5% against the US dollar after worries surfaced over the Irish economy. 2nd Quarter GDP for Ireland showed a 1.2% decline against an expectation for 0.5% growth which highlighted the struggle being faced by the country and other ‘peripheral’ European economies. Wednesday saw the Irish government deny that neither the country itself nor any of the banks within it would default on their debt. Bond markets reacted poorly to the news with the spreads on Irish bonds rose to a record high – a clear sign that investors are avoiding the country’s debt. Out tomorrow there is German business climate data so call in to ensure that you protect yourself against adverse market movements.

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