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Posted June 6th, 2011 by Charles Purdy

EUR/GBP Rate & Comments for 6th June 2011

EURO/GBP - 1.1228

Sterling ended last week by falling to a 4 week low against the euro on optimism over a new bailout for Greece. Disappointing UK data provided further evidence that UK interest rates are likely to remain at record lows and this saw sterling drop – it starts the week hovering just above €1.12/£1. Against the US dollar, sterling should remain well supported above $1.60/£1 as it tracks euro strength against the US dollar. The key event for the UK this week is the Bank of England’s meeting on Thursday. There is unlikely to be any change to monetary policy – especially given last week’s poor PMI figures – and we will need to wait another two weeks before the minutes are released to see how the committee voted. Call in now for a live exchange rate.

In the euro zone, the euro remains close to a one month high against the US dollar and sterling after it was revealed that Greece is set to receive a vital tranche of aid in July to avoid a default and the country comes close to securing a new aid package. Despite there being no long term plan in place to deal with the euro zone crisis, the euro is expected to gain ahead of the ECB’s interest rate meeting on Thursday. Investors expect Jean-Claude Trichet to signal “strong vigilance” on interest rates – effectively clearing the way for a July hike.

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