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Posted January 10th, 2011 by Charles Purdy

EUR/GBP Rate & Comments for 10th January 2011

EURO/GBP – 1.2028

Sterling had a strong day on Friday, closing above 1.20 against the euro after the biggest weekly gain against the single currency since mid-November 2010. Sterling benefitted from heavy selling of the euro as concerns over the debt crisis increased. After weaker than expected services and construction data earlier in the week, sterling took advantage as borrowing costs for Portugal, Spain and Italy went up ahead of an important week for European Government borrowing. It is a quiet start for data in the UK this week before the Bank of England’s interest rate meeting on Thursday. Whilst inflation is still stubbornly high and markets are expecting an interest rate hike at some point, this is unlikely to happen this week as the Bank will probably wait and see what impact the VAT increase and spending cuts has before changing current policy. Speak to one of the traders today about your upcoming payments.

In the Euro zone, a large sell off of European ‘periphery’ bonds, an EU proposal on lending and poor German retail sales data saw the euro slump to a 4 month low against the US dollar and drop below 1.20/ £1 against sterling. The EU proposal outlined plans to force those who lend to banks to accept losses should the banks fail and insurance against default for Spanish and Portuguese neared record highs. Analysts said there is scope for further euro losses this week so call in now for a live exchange rate – especially as the news overnight is that Portugal is now under pressure to accept a bailout.

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