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Posted May 23rd, 2011 by Charles Purdy

EUR/GBP Rate & Comments for 23rd May 2011

EURO/GBP - 1.1518

Sterling starts the week slightly lower against the US dollar, having tracked the euro’s decline against the US currency over the weekend. Sterling is hovering just above the €1.15/£1 mark after concerns over the euro zone debt crisis pushed the single currency lower. The subsequent drop in risk appetite has seen demand for the safe haven US dollar and the FTSE 100 open lower this morning. Despite data last week showing higher than expected inflation and retail sales figures in the UK, analysts are still lacklustre over the UK recovery. The Bank of England’s chief economist Spencer Dale said in an interview over the weekend that the MPC must start to tackle inflation by raising interest rates or risk damaging the economy and its own credibility. Out this week we have borrowing and revised GDP figures, so call in now for a live exchange rate.

In the euro zone, the euro continued to suffer on worries over a potential restructuring of Greek debt. Rating agency Fitch downgraded Greece’s rating last week and Standard & Poor fanned the flames by doing the same to Italy over the weekend. A debt restructuring is the last resort for Greece, and the country’s prime minister said that the country should push on with budget cuts to overcome the debt crisis. It is relatively quiet for data this week, but expect the debt crisis to cause significant movements.

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