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Posted February 15th, 2011 by Charles Purdy

EUR/GBP Rate & Comments for 15th February 2011

EURO/GBP - 1.1886

Sterling was firm yesterday ahead of a big day of data releases in both the UK and euro zone. We have UK consumer inflation, euro zone GDP and US manufacturing data. In the UK, inflation is expected to break the 4% barrier – up from 3.7% in December. What is uncertain though, is the extent of the recent VAT increase. If this has already been passed on by retailers, then the impact on inflation will not have been so great. Inflation is still in line with the Bank of England’s expectations, with Mervyn King expecting it to peak at around 5% before dropping back off. Tomorrow’s Quarterly Inflation Report should give a clearer picture of the Bank’s expectations and intentions for monetary policy. Either way, it is set to be a turbulent few days so call in now for a live exchange rate.

In the euro zone, the euro hit a 3 week low against the US dollar on fresh fears over the region’s banking system. Markets are starting to realise that there is no ‘silver bullet’ that will fix the crisis and the increasing lack of a solution is taking its toll on the single currency, despite European Finance Ministers agreeing to a new fund totally €500bn from 2013. There is a wide array of data released today, with key economic sentiment data and the latest GDP figures that are expected to show 0.4% growth in the region for last Quarter. With both euro GDP and UK inflation being released within a short while of each other we could see some significant volatility.

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