Monday, 5 May 2008

Weekly € rates and comments - week commencing 5th May 2008

Sterling seems to be getting into a trend where it does well at the end of the week. I suppose its all relative as we are still a long way from where we were in the autumn of last year. UK manufacturing input and output prices rose to record levels in April. The feeling in the market is that this means the Bank of England will keep UK interest rates on hold at this weeks meeting as inflation will be their major concern. We wait and see.

 

Economic data for Euro land continues to deteriorate and the € sits at €1.273/£1 inter bank. The market believes that the European Central Bank will have to cut Euro land interest rates in the near future or risk a sharper downturn in economic growth. I would be surprised though if we did see the ECB reduce interest rates any time soon because inflation seems to be the ECB's greatest concern and keeping interest rates at current levels helps control inflation. Given the strength of the German economy the € has the best economic fundamentals when compared to the US$ and sterling.

 

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