Weekly € rates and comments – week commencing 20th October 2008

After a positive start to the week which saw sterling make gains against the euro and US$, sterling only managed to maintain similar trading levels to previous weeks. The start of the week benefited from renewed confidence born from the UK treasury's cash injection to the high-street banks and lending markets. There was unprecedented volatility in the stock markets throughout the week, the FTSE recoded its worst daily losses in several years, but this did not translate to the value of the pound on the markets and prices remained relatively steady. The Bank of England suggested this week that inflation was now expected to return to target levels sooner than had been previously anticipated, earlier in the year, and suggestions from one member of the MPC supported speculation on the likelihood of interest rate cuts in the coming months.

 

The euro currently at 1.297/£1 is losing ground. Having convened over the weekend to discuss the strategy to deal with the global financial meltdown the European member states opted also for large cash injections into their financial institutions with assurances and guarantees on deposits held. European market data showing that inflation has officially fallen from its peak in the summer which has now opened the door for the ECB to lower their interest rates sooner than expected.