Weekly € rates and comments – week commencing 15th December 2008

The downward trend for sterling has continued. More record lows were recorded against the euro and the dismal outlook for business growth, falling house prices and rising unemployment has only compounded matters. Exchange bureaus are now officially offering less than €1/£1 and the market rates are only a few cents away from parity. Consumer confidence has been severely dented according to the Bank of England's minutes, which were released last week and the UK's outlook is increasingly negative. Better-than-expected UK retail sales data both year-on-year and month-on-month did nothing much to help. Still no sign of any upside for Sterling.

 

Mixed Eurozone data and the continuing speculation that the European Central Bank will not slash interest rates in the same manor as the UK and US saw the euro make substantial gains against the US$ and sterling. The outlook for 2009 remains gloomy for Europe and according to some analysts the delay in cutting interest rates could prove to have a prolonging effect on the recession and a mistake in the long-term.

Weekly € rates and comments – week commencing 15th December 2008

Sterling suffered another slump against the euro and drew massive media attention for hitting record lows daily. The fall in value of over 20% through this year has and will continue to have a serious impact on sectors the UK economy with added pressure on everyone from major importers through to British ex-pats having their pensions transfers sent overseas. On the flip-side of this, UK exporters who may have expected to benefit from the ever-cheapening pound have only found that business on the whole has slowed down as the global economic down-turn gains pace. Poor economic data continued to weigh on sterling with falling industrial production and a further contraction in the housing market all contributing to the demise of sterling.

 

European market data had been rather indifferent throughout last week but thanks to the obvious issues in the UK and America the euro made broad gains against sterling and the US$. Some of the advances from the euro are perhaps thanks to a less 'aggressive' approach from the European Central Bank (ECB) in reducing euro interest rates as well as comments this week from ECB board members suggesting that they are not guaranteeing further cuts in the early months of 2009.

                                                                                                                          

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.