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Posted January 13th, 2011 by Charles Purdy

EUR/GBP Rate & Comments for 13th January 2011

EURO/GBP - 1.1987

Sterling strengthened to near a 1-month high against the US dollar yesterday following strong buying by Asian sovereign accounts. This helped offset an earlier drop caused by poor UK data. Figures released showed that the UK trade deficit widened to £8.736bn in November – £0.4bn more than expected and the highest trade deficit since records began in 1980. The data saw sterling drop marginally against the euro and US dollar but it was well supported by large purchases of sterling from Asia and Russia. Tomorrow is a busy day for data; with manufacturing production figures and the first Bank of England interest rate decision of the New Year. Policy is not expected to change, but investors will keep a close eye on the minutes of the meting hen they are released in 2 weeks time. 

In the euro zone, the euro posted gains against the US dollar and sterling after a key Portuguese bond auction went slightly better than expected and news emerged that many investors believe the European Union will add further funds to the emergency bailout fund. Whilst the euro performed well, it was simply a  reaction to the auction not being as bad as expected – specifically the yield that Portuguese government needs to pay on the debt, which came in at 6.7% against an expectation of above 7%.  The upshot is that the crisis is by no means over. Today sees the ECB interest rate and press conference, so call in now for a live exchange rate.

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