Weekly € rates and comments – week commencing 9th March 2009

With little else in terms of other significant economic data due out, the main focus for last week was the rather predictable decision from the Bank of England on interest rates. The decision to cut by another 0.5% to set a new base rate of 0.5% did not have any immediate effect on the value of sterling as the news was so widely expected but the "promise" of quantitive easing is undermining sterling and limiting possible upside movement. This week we see the release of UK and European industrial data and UK and US trade data. Neither sets of data are expected to be good showing significant declines for the former and significant balance of payments deficits for the latter. No rays of sunshine on the horizon for the foreseeable future.

 

Eurozone GDP figures shortly preceded last week's other important European economic news of an interest rate cut by 0.5% to a new record low for the single currency. However, with the interest rate decision and the GDP figures both coming in as expected, the euro simply maintained a steady value against most major currencies including sterling and the US$. Inflation, or a lack of it, still remains a major concern for the European Central Bank as forecasts suggest that the future months will be running under the target rate of 2%. This will almost certainly lead to further cuts in euro interest rates if correct and will test the euro's resilience in the middle stretch of 2009.