Weekly € rates and comments – week commencing 28th July 2008

Weekly € rates and comments – week commencing 28th July 2008

 

The pound threatened to buck the recent trend and pushed for month-high prices against most major currencies early last week. In their published MPC meeting minutes, the Bank of England showed in that although the majority of the members voted to keep rates on hold, there was a three-way split for only the second time since the start of its independence in 1997.

 

The pound ended the week on the back foot and with more poor economic data strengthening the case for a cut in rates the downside risk for sterling could well be greater than the upside potential in the short term.

 

The Euro, currently at 1.2630/£1 inter bank, maintained its strong position on the markets and fended off speculation that the rot of the credit crisis is finally setting in for mainland Europe. Spanish unemployment is in double digits for this quarter to over 10% and with the country threatening to enter a lengthy recession, such events may well send a message that the new force in the currency markets is finally running out of steam.

Weekly € rates and comments - week commencing 21st July 2008

 

Sterling remained steady last week and has kept within a tight trading range against most currencies. In the last 3 months the price has found a new base and this stability is perhaps owing to forecasts that interest rates are to remain on hold in the UK until the end of the year. UK unemployment figures released last week showed an increase and mean that sterling is unlikely to see much upside in the short to medium term.

 

In spite of mixed European data and despite reports that the region may enter an "economic growth trough", the € has maintained a strong position against all major currencies. It now sits at €1.2550/£1 inter bank. European exports dropped by 3.4% in May [perhaps due to the overpriced €] and it remains to be seen if the Eurozone will continue to be immune to what is supposedly a global economic crisis.

Weekly € rates and comments - week commencing 14th July 2008

 

 

Minimal movement for sterling last week against most if not all other currencies. The Bank of England kept UK interest rates on hold which was as expected. What choice did they have, UK inflation is high and the economy weak. Probably none but I do wonder why interest rates are so high given they seem to have so little control over the major factors affecting UK inflation e.g. food, commodity and energy prices. Further falls in UK house prices and the major house builders have been laying off employees in significant numbers. As I mentioned previously the only plus for sterling is that the UK economic disarray is not dissimilar to that elsewhere.

 

The € sits at €1.251/£1 inter bank. Euro land is the best of a bad bunch. Economic conditions continue to deteriorate and no country is immune. Even German production fell in May by 2.4%. I suppose the major plus they have is that the populations when compared to the US and the UK are not as indebted and as such should be able to weather these poor economic conditions in a better state.

€ 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 €.