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.