Monday, 11 February 2008

Weekly € rates and comments - week commencing 11th February 2008

 

Sterling held the middle ground this week. The Bank of England reduced UK interest rates by 0.25% which was as expected. The UK economy continues to suffer with weakening demand and continued disruption to the financial markets. UK manufacturing output fell in December which was contrary to expectations. However, inflation continues to exceed the target of 2.0% which makes rapid cuts in UK interest rates unlikely. The next UK interest rate reduction of 0.25% is being forecast for April.

 

The € sits at €1.330/£1 inter bank. The European Central Bank kept Euro land interest rates on hold. This again was as expected. However the hawkish tone of the previous announcement with inflation being a major worry was replaced by notes of caution on the Euro land economy arising from financial turbulence and a slow down in the economies of major trading partners. Another chink in the €'s armour and we may see talk of cuts in Euro land interest rates sooner than expected. However it still will not happen quickly.

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