Weekly € rates and comments – week commencing 23rd February 2009

All in all last week was a quiet week for sterling with few significant events or data releases to move the markets.  Having kept within a steady range against the US$ and edging up by a couple of cents on the euro over the week, a period of stability is perhaps a positive given how volatile exchange rates have been over the last eighteen months. The positives for the UK economy were better-than-expected house price figures and retail sales. However, the Bank of England revealed in the minutes from their last meeting on interest rates a unanimous vote in favour of quantitive easing to stimulate the economy. This promise of printing more money to increase supply from the lending banks did not cause any immediate harm to sterling's value but may not be looked upon favourably should this policy be enacted in the difficult months ahead.

Major concerns regarding some of the EU's newer member states' commitment to the single currency as well as the exposure level of their banks to the global credit crisis resulted in a tough week for the euro. Reassurances offered by the German finance minister that these (mostly Eastern European) states could be bailed out by the Germans and other more developed EU members, helped alleviate these fears and limit the damage done to the euro. The Polish Zloty has been one of the previously emerging markets currencies that has suffered of late and subsequently has reached its lowest price against the euro for approximately 5 years.