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.

Weekly Euro rates and comments - Week commencing 20th August 2007

 

Sterling continues to be under pressure. The liquidity crisis is having far reaching consequences. The flight to safety has focused on the Yen, the Swiss franc and the US$ in the form of treasury bonds. UK news focussed on the Consumer Price Inflation figure for July of 1.9% being for the first time in a while less than the target rate set for the Bank of England of 2%. Also the minutes of the last BOE meeting were announced and they showed a 9 to nil vote in favour on keeping UK interest rates on hold. The market now believes that UK interest rates will be kept on hold for a while and is even wondering if the market turmoil will negate the need for a further increase. As I noted at the start, sterling is under pressure.

 

It was only a couple of weeks ago that the Euro pushed up to towards € 1.50. At one stage, at the start of last week, we were close to € 1.465. It now stands at € 1.471/£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 € 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.

 

Weekly Euro Rates and Comments - Week Commencing 13th August 2007

Sterling had a strange start to last week losing a cent and half against the Euro very first thing Monday morning. The explanations as to why the sudden movement happened have been somewhat limited especially given the lack of sterling negative news over the weekend. At the same time, there was a rapid decline in the US$ against the Euro. There has been a partial recovery in sterling during the course of the week but it would seem that sterling is now being identified as a high risk rather than a safe haven asset and, as such, is moving in line with the US$ dollar against the Euro. The flight to safety has been brought about by high volatility in the equity markets and the credit crunch in the debt market which are making investors very nervous.

 

The Euro is currently sitting at €1.478/£1. It was only a couple of weeks ago that the Euro pushed up to towards €1.50. At one stage, at the start of last week, we were close to €1.465. The ECB has made it clear that interest rates will be increased next month by 0.25%. Even though the Euro is very strong against the US$, the German economy is still growing and, as the economic powerhouse of Europe, it means that Euro land is on the up. The strengthening of the Euro against the US$ and sterling was much quicker than anyone could have forecast and we wait to see if it can be sustained.

 

 

 

Weekly Euro Rates and Comments - 6th August 2007

 

The Bank of England held UK interest rates at last weeks meeting. This was no surprise given the BOE increased rates at the previous meeting, the significant volatility in the equity markets and the major floods in certain parts of the UK in the last month or so. Sterling is still holding its own and the market still expects that we will see at least one further increase in UK interest rates by Christmas.

 

The Euro has strengthened to €1.475/£1 inter bank. The European Central Bank kept Euro land interest rates on hold this week but come September the markets expect interest rates to be raised by at least 0.25%. This will support the Euro short term. However the Euro is still very strong against the US$ which is hurting Euro land exporters and as such we can expect pressure on the ECB to moderate their increases in interest rates. In fact France has been very vocal in wanting interest rates to be reduced.