€ rates and comments - week commencing 7th April 2008

 

Over the course of last week sterling held steady against most other currencies. The availability of mortgages continues to be a problem for the housing market as the banks take the classic approach in such times by restricting supply and improving margins. Probably making the same money with a lot less risk. Business confidence in the UK continues to ebb away and the Bank of England meets later this week and the expectation is for a 0.25% cut in UK interest rates. The surprise would be no cut at all. No significant upside for sterling short term.

 

 

The € is still viewed as the safe haven asset and sits at €1.265/£1 inter bank. However, a few more chinks began to appear in the €'s armour. Retails sales in Germany were worse than expected. In fact they fell. Also the Euro lands services purchasing managers index fell in March which again indicates problems with the economy. But the European Central Bank continues to highlight the importance of its fight against inflation so no chance of cuts in Euro land interest rates any time soon. So don't expect any gains for sterling against the € short term.