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Posted October 21st, 2010 by Charles Purdy

EUR/GBP Rate & Comments for 21st October 2010

EURO/GBP – 1.129

Sterling gained against the US dollar yesterday as George Osborne outlined plans for UK spending cuts but it fell against the euro as the Bank of England minutes showed one member voting for further Quantitative Easing. With plans for job losses, cuts to the welfare state and an increase in the retirement age, investors were encouraged by the government’s aggressive approach to cutting spending and fighting the budget deficit, sterling gained against the US dollar – hitting a high of $1.5875/£1. In a similar vein to what was seen after the election and the emergency budget, the markets gave the government a rubber stamp of approval for their plans. Against the euro, sterling went the other way hitting a low of 1.1339/£1 over concerns that further Quantitative Easing was on the way following the Bank minutes. Overall though, most of the damage has been done already in the run up to today and it was not as bad as many had predicted. Out today, there is retail sales data and Adam Posen (the MPC member that advocated further QE) speaks in Vienna. Get in touch now as his comments are likely to pretty downbeat.

In the Euro zone, German wholesale inflation data came in 0.1% better than expected, showing a 0.3% rise on the month. This helped boost the euro, alongside the relatively downbeat Bank of England minutes which contrasted sharply with their European counterparts who recently were a lot more upbeat about European monetary policy, with European Central Bank board member Juergen Stark quoted saying that the ECB may raise interest rates. There is a raft of European inflation data released today, so speak to one of the team now to avoid losing out.

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