Weekly € rates and comments – week commencing 12th January 2009

Sterling gained against most major currencies last week with substantial gains made against the euro. The Bank of England's (BoE) much expected cut of 0.5%, bringing UK interest rates down to an all-time record low of 1.5% had already been factored in and did nothing to harm sterling's positive start to the week. It will be interesting to see if sterling can maintain the momentum of this week in the coming weeks. The increasing speculation towards European interest rates being cut by the European Central Bank saw sterling rise approximately by 6% by the time the BoE had announced their cut. So now the onus has shifted to next week's decision in Europe to see what the trend between sterling/euro might be and whether the effects of the credit crunch in the Eurozone will finally level the playing field for sterling.

 

European reports and estimates for inflation have weighed heavily on the euro last week. Growing expectations of future interest rate cuts in Europe, with the next scheduled meeting on Thursday, will hopefully be welcomed as good news for people looking to buy euros from sterling in the coming months. Economic data releases are persistently poor and the unavoidable effects of the credit crunch seem to be finally chipping away against the resilient euro.