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Posted January 24th, 2011 by Charles Purdy

EUR/GBP Rate & Comments for 24th January 2011

EURO/GBP - 1.1741

Sterling finished slightly stronger against the US dollar on Friday after following the euro higher against the US currency. It was a volatile week for sterling after much higher than expected interest rates heightened expectations for a sooner than anticipated hike in UK interest rates. This saw sterling hit a high of $1.6060/£1, however a poor set of fundamental figures – including a 0.8% drop in retail sales for December on Friday – saw the sheen taken off analyst’s expectations for an interest rate rise. Retail sales were expected to fall as a result of December’s inclement weather, but not by as much as they did. It is a very important week for sterling, with preliminary GDP for the 4th Quarter of last year and the minutes from the most recent Bank of England meeting. The minutes will be very closely watched for any sign of a change in monetary policy so call in now for a live exchange rate. 

In the euro zone, the euro hit a 2 month high against the US dollar – breaking above the $1.36/€1 level – as market anxiety over the euro zone debt crisis started to ease. Strong debt auctions from Portugal and Spain and warnings over higher inflation in the region have helped to reduce panic over a systemic collapse. However, Sunday’s events in Ireland could yet test this. Ireland’s Green party withdrew from the coalition government to end a weekend that saw Prime Minister Brian Cowen step down from his party’s leadership but stay on until key budget legislation is passed that was a key requirement of the recent EU bailout. The move by the greens paves the way for a March 11 election – we shall have to see how this pans out for the euro this week.

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