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Posted July 25th, 2011 by Charles Purdy

EUR/GBP Rate & Comments for 25th July 2011

EURO/GBP - 1.1344

Sterling performed well towards the end of last week against the US dollar as investors celebrated a second round bailout of Greece. The pound hit the highest levels against the US dollar since late May as investors backed the UK’s fiscal plan over Europe or the USA. Against the euro, sterling is held back by poor economic growth as interest rates rise at a faster rate in the euro zone. This week sees the first estimate of UK GDP for the 2nd quarter which many analysts expect to show minimal growth of 0.1% against a first quarter figure of 0.5%. Many analysts are warning that there could be a ‘downside surprise’ – i.e. it comes in much lower than 0.1%, so call in now for a live exchange rate.

In the euro zone, whilst last week’s bailout plan for Greece was widely celebrated by the markets, there is concern that it is only a temporary solution which fails to address the core issues. The plan is heavily reliant on Greece meeting obligations on spending and tax – something it has already failed to do on the first bailout. Key changes to the European bailout fund will not be debated by the German parliament until September, leaving further uncertainty. Released this week there is euro zone inflation data that is expected to creep up further towards 3%, which is likely to keep the pressure on the ECB to increase interest rates later in the summer. Call in now to ensure you don’t miss out.

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