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Posted January 18th, 2011 by Charles Purdy

EUR/GBP Rate & Comments for 18th January 2011

EURO/GBP - 1.1960

Sterling jumped to an 8 week high against the US dollar and moved up against the euro after speculation that the Bank of England could raise interest rates as early as May. Sterling hit $1.5953/£1 and €1.1974/£1 as traders speculated that tomorrow’s Consumer Price Inflation could show inflation close to 4% – 2% above the Bank of England’s target level. The dilemma being faced by policy makers is that any interest rate hike could dent the UK’s fragile recovery – especially as the recent VAT hike and cuts have yet to take full effect. A higher than expected CPI figure is likely to see further sterling strength later today so ensure you call in now for a live exchange rate.  

In the euro zone, the euro fell broadly yesterday after investors reassessed ECB President Jean-Claude Trichet’s call for interest rate rises last week and also saw that no ‘quick-fix’ was to be put in place for the euro zone’s bail out fund. The majority of finance ministers in the region today called for an increase in the lending capacity of the emergency fund to €700bn, but Germany was reluctant to push through urgent changes citing a calmer bond market and an aim to discuss ‘anti-crisis measures’ in more depth in March. Germany clearly does not want to increase the rescue fund, and as such sentiment towards the single currency slipped. Out today, there are economic sentiment figures for the region, so call in now for a live exchange rate.

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