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Posted January 12th, 2011 by Charles Purdy

EUR/GBP Rate & Comments for 12th January 2011

EURO/GBP - 1.2010

Sterling held firm above the €1.20/£1 level after jumping to a four month high in the last few days as sovereign debt concerns continued to punish the euro and expectations of an interest rate hike in the UK gave sterling a boost, despite a survey by the British Retail Consortium showing that sales dipped 0.3% in December on the same period in 2010. Euro weakness drove the price movement ahead of an important bond auction for Portugal which could see the country head to the IMF and EU if they struggle to raise enough funds. With Thursday’s UK interest rate decision in focus, many analysts feel that the UK is set to see an interest rate hike much sooner than expected. However, there are commentators that feel a hike in response to market pressure could be too early and it could damage already fragile growth. It is a quiet day for UK data again tomorrow, so call in now for a live exchange rate.

In the euro zone, the euro saw a brief respite from heavy selling after Japan pledged to buy euro zone bonds in an attempt to stabilise debt markets. However, the respite soon wore off and the single currency suffered ahead of a key bond auction tomorrow. Portugal is set to raise €1.25bn in an auction that will signal whether the country will be able to afford the interest demanded by investors or it will need to seek a bailout from the EU/ IMF. This is going to cause some volatility, so call in now for a live exchange rate

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