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Posted March 15th, 2013 by Charles Purdy

Is this a short term bounce for sterling? | Smart Daily Currency Note

GBP/EUR – 1.1608

I can’t remember when last I was able to write that sterling is at a higher level against both the euro and the US dollar than this time last week. However this was on the back of good US economic news rather than good UK economic news as sterling gained a cent from recent lows, breaking through the 1.51 level against the US dollar and the 1.16 level against the euro. Reports suggesting Qatari officials have held talks about investing in infrastructure projects in the UK also helped. The bad news is that lots of economists are also suggesting that this gain was actually based on investors taking their profits on bets against the pound, and not on any underlying economic strength. As a consequence, the recovery looks fragile; limited support for government policy, the recent credit rating downgrade and speculation that the Bank of England will extend monetary easing all add up to create a poisonous cocktail for sterling. Indeed, HSBC yesterday downgraded their 2014 forecasts for the US dollar rate to 1.46 and the euro to 1.0420. Uncertain times indeed. Get in touch now for the latest news on this recent rally, and for up to the second rates.

It has been a mixed week for the euro, with a mid-week slump causing the euro to trade at well below 1.30 against the recovering US dollar, before regaining some lost ground at the end of the week. Early poor performance was due to a number of factors, among them the failed Italian debt auction and the comments from the German finance minister suggesting that a bailout package for Cyprus would not be agreed until further bank restructuring had occurred. Today, the EU summit goes into its second day of talks and much like yesterday, the discussions will no doubt have an impact on the euro, so keep an eye out for the market reaction. Elsewhere, we will see the release of Consumer Price Index (CPI) data for the past month, illustrating inflation in real terms. The outcomes of this will also be reflected in the markets. Get in touch for the latest rates and up to date information.

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