Weekly Euro Rates and Comments - Week Commencing 30th July 2007

Sterling has enjoyed a roller coaster week, hitting yet more 26 year highs against the US$, pushing close to €1.50 and then losing strength towards the end of the week following evidence that the UK housing market was beginning to slow thereby suggesting that the need for further UK interest rate rises in the near term were diminishing.

 

The Euro suffered at the start of the week when it pushed close to €1.50/£1. We are now back at a more "normal" exchange rate of €1.482/£1 inter bank. German business confidence is weakening on the back of the strong Euro against the US$. As the German economy is the key driver for the Euro land economy this is not a positive sign. However, the UK economy must also be suffering from a strong £ against the US$ and so we should not assume that sterling will hit €1.50/£1 any time soon.

 

Weekly Euro Rates and Comments - Week Commencing 23rd July 2007

At their last meeting the Bank of England voted by six votes to three to increase UK interest rates by 0.25%. The concern of the three was that we still needed to see what affect the previous increases had had on the UK economy before instigating further increases. They may well be right as UK retail shows some signs of slowing [although torrential rain probably doesn't help]. The general feel in the market is that a further increase of 0.25% is likely later this year but some commentators are now no longer as certain of this as they were.

 

The Euro [€1.486/£1] lost a bit of ground against sterling on the back of the Euro highs against the US$. This is even hurting industry in Germany so goodness knows what pain the French and Italians are having to endure.  However, the European Central Bank is expected to increase interest rates in September to keep on top of inflation so I suspect limited further upside for sterling unless there are some surprises around the corner.

 

Weekly Euro Rate and Comments - 16th July 2007

Limited UK economic information released in the last week or so and as such sterling's position against other currencies has been influenced by what is happening elsewhere rather than here. There is still inflationary pressure in the UK system, which is being exasperated by increasing oil prices, and which will be difficult to curtail without even higher UK interest rates. So it will be interesting to see the minutes of the last Bank of England meeting and what their view is and how close last times vote was when they increased UK interest rates. 

 

The Euro [€1.485/£1] has been supported by upward revisions to first quarter gross domestic product growth and healthy industrial production in Euro land. The European Central Bank is expected to increase interest rates in September to keep on top of inflation.