Weekly Euro Rates and Comments - Week Commencing 27th August 2007

Sterling had a better week. The markets have regained some equilibrium following the Feds move to reduce their lending rate to financial institutions. Also the ECB and the Fed continue to make available liquidity as and when required and in whatever size required. Any economic data released recently seems to have ignored. However, sterling will continue to be under pressure while the liquidity crisis continues and safe haven such as US treasury bills are preferred.

 

No real change for the Euro. Less than a month ago the Euro pushed up towards €1.50/£1. Then it pulled back close to €1.465/£1. It now stands at €1.470/£1 inter bank. The ECB had made it clear that interest rates would be increased next month by 0.25%. However given the volatility in the market place and the need for the ECB to supply liquidity, the market is beginning to wonder if the expected increase in Euro interest rates will happen in the short term. However, we have to remember economically that Euro land continues to leave the UK in its wake. So if you see any respite for sterling against the Euro then it may make senses to look at it as a short term buying opportunity.