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Posted May 18th, 2011 by Charles Purdy

EUR/GBP Rate & Comments for 18th May 2011

EURO/GBP - 1.1382

UK inflation hit 4.5% in April, an increase from March’s 4%, a 2-1/2 year high. With the U.K. economy contracting in the fourth quarter of 2010 and hardly expanding in the first quarter 2011, coupled with cuts in government spending, the Governor of the Bank of England Mervyn King warns that in reacting too quickly to rising prices [i.e. increasing UK interest rates] could harm the economy. Initially sterling strengthened jumped yesterday after a bigger-than-expected rise in UK consumer prices, as investors acknowledged higher inflation will hardly lead to an interest rate anytime soon. Out today we have BoE’s MPC minutes which will shed further light on the BoE’s thinking. So call in now to get the latest news and prices.
The euro is weighed down by concerns that Greece might restructure its massive debt. Jean-Claude Juncker, chairman of euro zone finance ministers, said for the first time yesterday that Greece may have to ask investors to extend the maturities of the Greek debt. This will be a default in most peoples minds. The IMF will complete in mid- June its detailed analysis of Greek debt which means another month of uncertainty. The main support for the euro is that interest rates at least in the short term are expected to rise faster in the euro zone than in the U.S. German investor sentiment data released was weaker than expected. Call in now to see which way the euro is moving today.

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