Weekly € rates and comments – week commencing 2nd February 2009

Sterling had a good week. It started positively when the Chairman and CEO of Barclays Bank wrote an open letter to the market saying they were doing better than the market thought. This brought a bit of stability to the UK financial market which is a key part of the UK economy. Then the International Monetary Fund weighed in saying that of all industrialised nations the UK was likely to suffer the greatest recession due to this dependence on finance. The rest of last week showed sterling gain steadily against most currencies which seemed to stem from disquiet elsewhere rather than what was happening here. I think we are still in stormy waters for sterling, e.g. Honda start their 4 month shut down today, so I would suggest people don't get their hopes up for significant strengthening in the short term.

 

Euro land suffered the most, currently at 1.122/£1. Riots in the streets of Paris as the populous view the treatment of banks as unfair and preferential. Various countries increasing their rhetoric as to whether or not they should stick with the euro. When times are good one size can fit all. In times like these governments want/need more direct control over their monetary policy. However for euro land this is controlled centrally by the European Central Bank who have to look at the overall economy which means that Germany balances out, say Spain or Italy. So a week of weakness for the euro against sterling.