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Posted December 21st, 2011 by Charles Purdy

EUR/GBP Rate & Comments for 21th December 2011

EURO/GBP 1.1968

Sterling jumped to an 11 month high against the euro yesterday as investors scrambled to buy the pound, believing sterling to be a much safer investment than the ailing euro. Better risk appetite also saw sterling gain against the US dollar as strong US and German economic data reduced demand for the safe haven US currency. Sterling’s relative strength is also being put down to an expectation that the UK will continue to hold onto its prized AAA credit rating whereas many see France and Germany at risk of downgrades. Out later today we have the minutes from the Bank of England’s recent meeting which could pour cold water on yesterday’s rally so call in now for a live exchange rate.

In the euro zone, a sharp drop in Spain’s short term borrowing costs saw the euro strengthen against the US dollar yesterday but the single currency still struggled against sterling. Better than expected German business confidence data also helped, but the picture is still a very gloomy one for the region heading into 2012 with many concerned that European policymakers are not doing enough to solve the European debt crisis. The failure of the recent EU summit to reach a solution and the apparent confusion between leaders, the ECB and the IMF as to the best route forward has been worrying markets.

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