Weekly € rates and comments – week commencing 8th December 2008

Another week in the doldrums for sterling saw it fall against almost all major currencies, reaching a new record low against the euro and a multi-year low against the US$. The main focus of the week was the decision on interest rates from the Bank of England (BoE). Cutting UK interest rates from 3% to 2% was the expected move from the BoE with an eye on boosting the economy and helping thee ailing credit markets. However, the lack of any significant movement since the decision is testament to the limitations of monetary policy and how it will help the flagging UK economy in the short term.

 

Eurozone interest rates were also cut by a record 0.75% on Thursday from 3.75% to 2.5%. The Euro is currently at 1.161/£1. Though the decision from the European Central Bank was a little more guarded than that of the Bank of England, the cut did little to affect the euro's value in the markets. Future projections for the European economy suggest that inflation will remain under control and close to the 2% target but the outlook for the Eurozone economy is continuing contraction until late 2009. European Gross Domestic Product data came in much as expected and made for a rather uneventful week for Europe.