Weekly € rates and comments - week commencing 28th January 2008

 

Sterling continues to gather friends. Not enough friends for a party but a great improvement when compared to two weeks ago. The minutes of the last Bank of England meeting were announced and showed that the BOE was still focussed on combating inflation and a key control is UK interest rates. The market still expects UK interest rates to be reduced but one suspects that unless something like a new Northern Rock happens the cuts will be made in 0.25% steps over a period and in a considered manner. Otherwise UK news was dominated by news from elsewhere. So given the uncertainty either way I would suggest that to buy or sell euros makes sense so as to be very sure of what your costs are or what you are going to get.

 

The € lost a bit of ground last week and sits at €1.347/£1 inter bank. Not a huge surprise given the news of the week was a Paris based trader managing to lose €5 billion. How on earth can you manage to do such a thing? It appears with not much difficulty and it doesn't take much time. We live in a very strange world when such things can happen! Euro land finance ministers want the European Central Bank to focus on the economy [reduce € interest rates] but the ECB continues to focus on inflation [maintain € interest rates].  The former may be more likely if the US does go into recession as the market is expecting.

Weekly € rates and comments - week commencing 21st January 2008

 

Sterling  isn't as friendless as it was last week. Still not the belle of the ball but at least the occasional glimmer of interest. The fate of sterling was more influenced by what was happening elsewhere rather than here in the UK. Still significant problems given the parlous state of the UK economy and the Bank of England has a difficult balancing act between fighting inflation and helping the economy. The market still expects the BOE to reduce interest rates to help the economy but the BOE needs to use UK interest rates to fight inflation. The housing market continues to suffer and the retail performance over Christmas was very mixed. Hopefully last week was the week where sterling found a base against other currencies. The only fear is that something nasty similar to Northern Bank comes out of the woodwork!

 

The first chink in the €'s armour, which is sitting at €1.343/£1 inter bank, with the head of the Luxembourg central bank saying that given the current circumstances the European Central Bank may have to be more flexible on interest rates. This statement was quickly withdrawn but I think most would concur that it showed common sense rather than blind faith. However the ECB wants to present a clear position as wage negotiations are currently underway and the ECB wants any agreements reached to be non inflationary. Once the wage negotiations are over the ECB may become more focused on the Euro land economy. However, for the moment the € is still the preferred currency when compared to sterling and the US$.

Weekly € rates and comments - week commencing 14th January 2008

 

Sterling continues to be friendless. The Bank of England kept UK interest rates on hold. The BOE have a very difficult balancing act. The economy is suffering but inflation is on the up. We have seen sterling lose 10% plus against the Euro in a very short period in time. This will help make our exports more competitive. However, at the same time it makes our imports more expensive thereby increasing inflationary pressures, especially as we have a balance of payments deficit. Retail figures have been mixed. M&S had a poor Christmas whereas Sainsbury and John Lewis seemed to do well. Also the credit crunch continues to be a problem with banks still wary in lending to each other. So overall not a happy situation which will take a while to work through. So we wait to see where the bottom is for sterling.

 

The € is all conquering given the sorry state of sterling, currently sitting at €1.320/£1 inter bank, and the US$. The European Central Bank kept interest rates on hold and have made it clear that they will not be reducing interest rates any time soon as inflation is their major concern. It is thought very unlikely the ECB will increase interest rates given the parlous state of western economies. Euro land exports must be suffering but as yet this does not seem to be a major factor in the ECB's thinking.

Weekly € rates and comments - week commencing 7th January 2008

 

 

Sterling seems to have no friends.  Has Gordon Brown finally been found out? The UK has both a balance of payment and a budget deficit both of which need to be funded. With UK interest rates falling this is proving to be somewhat difficult and it is very difficult to gauge where the bottom is for sterling against certain currencies, especially the €. Christmas retail sales have been mixed at best, the housing market is suffering and the credit crunch is still of concern. The markets have started to think that UK interest rates may fall by as much as 1% this year. Only a short while ago the market was predicting a reduction of 0.5%.

 

 

The € is still very much the preferred currency and sits at €1.342/£1 inter bank. It has gained over 10% against sterling since this time last year. Over the Christmas and New Year period the € has gained four cents against sterling. Inflation continues to be of concern to the European Central Bank and so any cuts in € interest rates are very unlikely short to medium term. In fact the market wonders if € interest rates will be increased given the ECB's concerns over inflation. But the Euro land economies are not a bed of roses and are not immune to problems elsewhere. Euro land exports are becoming expensive and uncompetitive. I don't know where the bottom is for sterling against the € but even with sterling's problems the fall in sterling against the € will not go on for ever.

Weekly € rates and comments - week commencing 1st January 2008

Sterling seems to have no friends.  Has Gordon Brown finally been found out? The UK has both a balance of payment and a budget deficit both of which need to be funded. With UK interest rates falling this is proving to be somewhat difficult and it is very difficult to gauge where the bottom is for sterling against certain currencies, especially the € where we are in unchartered territory. The markets have started to think that UK interest rates may fall by as much as 1% next year. Only a short while ago the market was predicting a reduction of 0.5%.

 

The € is still the preferred currency and sits at €1.354/£1 inter bank. Over the Christmas period the € gained three cent against sterling. Inflation continues to be of concern to the European Central Bank and so any cuts in € interest rates are very unlikely short to medium term. In fact one wonders if € interest rates will be increased given the ECB's concerns over inflation. But the Euro land economies are not a bed of roses and are not immune to problems elsewhere. Euro land exports are becoming expensive and uncompetitive. I don't know where the bottom is for sterling against the € but even with sterling's problems the fall in sterling against the € is not to go on for ever.

 

ALL THE VERY BEST FOR 2008.