€ weekly rates and comments - week commencing 7th July 2008

 

 

Did sterling have a lucky escape last week? The American private equity firm looking to invest in Bradford and Bingley pulled out citing a downgrade in the B&B's debt as the reason. In stepped the Bank of England to make sure that there was no rerun of Northern Rock. However it reinforces how precarious the finance markets are and that the credit crunch has a long way to run. Mortgage draw downs continue to fall as do house prices and the UK economy could be heading for a recession. Not a pretty picture. The only plus for sterling is that it is not dissimilar elsewhere.

 

The European Central Bank increased € interest rates by 0.25% which was expected. The € sits at €1.263/£1 inter bank. However the statement that accompanied the increase made it clear that this could well be the final increase for quite a while. This is quite a change from the expectations following the last ECB meeting in June and as such the € lost a bit of ground. Problems in Euro land vary from country to country and they do have the benefit of the German industrial power house. However, even this is beginning to suffer given the worlds economic woes and the strong €.