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Posted February 16th, 2011 by Charles Purdy

EUR/GBP Rate & Comments for 16th February 2011

EURO/GBP - 1.1930

Sterling strengthened against both the US dollar and euro yesterday following another jump in consumer price inflation in the UK. The figures showed that inflation hit 4% – up from 3.7% in December – giving rise to more and more speculation over interest rate hikes over the coming months. Financial markets had been pricing in an interest rate rise towards the second half of the year, but many feel there could be a hike as early as May. This saw sterling hit a high of $1.6169/£1 and €1.1963/£1 against the US dollar and euro on heavy buying. The Bank of England releases the latest Quarterly Inflation Report tomorrow which could see upward amendments to inflation expectations. If this happens we are likely to see sterling strengthen even further and break over €1.20/£1 and $1.63/£1, so call in now for a live exchange rate.  

In the euro zone, the single currency slipped yesterday to the lowest level against sterling in 4 weeks as rate hike expectations boosted sterling and European data disappointed. GDP figures for the region showed that the economy grew by 0.3% against an expectation of 0.4% which didn’t help. In addition, German economic sentiment undershot expectations – highlighting the fragility of the region. Tomorrow is a relatively quiet day for European data but could see debt crisis related volatility, so call in now for a live price.

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