€ rates and comments - week commencing 17th March 2008

 

Times continue to be interesting given the problems in the US and gold and gas reaching record prices. The UK budget was held last week. Nothing much happened as the Chancellor has some fairly simple and fundamental problems. The UK economy is not growing as quickly as hoped/wished for and tax revenues are less than out goings. So the Chancellor was unable to give much away or take much more from our pockets. In the current climate sterling itself is a side show and continues to gain against the US$ and stay close to all time lows against the Euro.

 

The € sits at €1.280/£1 inter bank. The € continues to be viewed as a safe haven currency close to highs against sterling and hitting ever increasing highs against the US$. In fact Euro land experienced industrial growth in January ahead of expectations. However, the European Central Bank has started to make a lot of noise as to how large exchange movements are bad for businesses. I think a good interpretation of this would be that the strength of the € is beginning to hurt Euro land business. But the ECB is unlikely to reduce interest rates soon and given US$ interest rates are expected to be reduced I can't see any reversal any time soon in the € strength.