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Posted June 10th, 2011 by Charles Purdy

EUR/GBP Rate & Comments for 10th June 2011


EURO/GBP - 1.1263

Sterling recovered from a one month low against the euro as investors took profits in the euro as the ECB signalled that it would raise interest rates next month as had widely been expected. The Bank of England meeting also went as expected, with the MPC voting to maintain interest rates at the record low of 0.5%. Earlier in the week, sterling had come under pressure as the IMF said that the UK’s AAA credit rating was under threat, stating that further quantitative easing could be needed if growth continued to suffer.There was slightly less pressure on the MPC to amend policy after poor factory and services activity data last week and the general UK slowdown. Markets have in recent months scaled back their expectations of an interest rate hike to early 2012 in the UK, and as such, little changed that outlook yesterday. In terms of data, there is key manufacturing and producer inflation data out today, so call in now for a live exchange rate.

In the euro zone ECB meeting – as expected – ECB President Jean-Claude Trichet stated that the committee would use “strong vigilance” with regards to inflationary pressures – a phrase that many take to mean that there will be an interest rate hike of 0.25% next month. However, the euro slipped against both the US dollar and sterling as President Trichet stated that there were “risks and elevated uncertainty” for the future, and as investors booked in profits from trades backing the euro ahead of the ECB meeting. Out later today there is European inflation figures and industrial production data, so call in now for a live exchange rate.

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