Weekly € rates and comments – week commencing 13th October 2008

In yet another historic five days on the UK markets, where the FTSE posted its biggest ever weekly loss, sterling fell against the euro and the US$ throughout last week. The co-ordinated cut in interest rates by the Bank of England, the European Central Bank (ECB) and The US Federal Reserve (the Fed) of half of a percent seemed to favour sterling least as sharp losses were seen across the board. The assurances provided by the British government's £40bn 'Special Liquidity Scheme' also seemed to do little to revive confidence in the economy and but for a late rally on Friday the sense that sterling still has a long way to come to be back at its levels of last year is an understatement.

 

Only three months after hiking interest rates by one quarter of a percent, the ECB cut to 3.75 % in the co-ordinated move with the UK and US. With inflation not the most worrying issue within the Eurozone anymore, the shift towards supporting business growth was their given rationale behind the decision. With this stance taken, speculation towards further cuts in rates will gather momentum and the euro, currently at 1.255/£1, may well stand to weaken on the markets going forward. However, the one certainty at present is the continuing air of unpredictability within the markets.