€ rates and comments - week commencing 30th June 2008

 

Sterling sentiment hasn't changed over the last few weeks. Problems still abound with UK inflation high and the UK economy slowing. The housing market is still suffering and as the credit crunch continues to bite, mortgage approvals have fallen significantly, we are far from seeing an end to the uncertainty. The Bank of England meets this week and the expectation that given the current diverse position noted above they will sit on their hands and keep UK interest rates unchanged. Do they have any other option? Probably not and I expect steady as she goes for a while.

 

The Euro which sits at €1.263 inter bank has held steady against sterling. The European Central Bank meets this week and is expected to increase € interest rates by 0.25%. This is on the back of high Euro land inflation. However Euro land economic conditions seem to be worsening quicker than expected and this will act as a "natural" break on inflation. It would be a real surprise if rates were not increased but this increase should be the last for the foreseeable future.