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Posted July 22nd, 2011 by Charles Purdy

EUR/GBP Rate & Comments for 22nd July 2011

EURO/GBP - 1.1306

Sterling hit a five-week high against the US dollar on Thursday as a draft conclusion was reached in Europe on the Greek debt crisis. This saw the euro rally against the US dollar and sterling followed the euro in gaining against the US currency. Sterling has tended to track US dollar gains against the single currency as investors pull back from safe haven investments in the US dollar. UK data yesterday was mixed, with figures showing an above forecast increase in retail sales figures for June. However, consumer confidence dropped in the same period and data showed that public sector net borrowing rose which left investors doubting the validity of the UK recovery. Earlier this week, the Bank of England minutes showed no change on last month’s voting, but there was less talk of potential further Quantitative Easing. Call in now for a live exchange rate.

In the euro zone, markets rallied after European leaders agreed a new rescue deal for Greece that will trim the country’s debt by 12% of GDP and see the European bailout fund given new sweeping powers. The euro gained 1% against the US dollar as relieved investors bought back in to equities following conclusions that a euro zone collapse was not imminent. Key points from the deal are that the European Financial Stability Facility rescue fund will help states sooner, recapitalise banks and intervene in the bond market in a drive to halt contagion. Despite waves of optimism, many do not expect this to last long as markets will inevitably question Greece’s ability to deal with its debt mountain.

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