Weekly € rates and comments – week commencing 30th March 2009

Having started last week positively, largely thanks to a better than expected inflation report., sterling's performance fell away mid week following an under-subscription of UK government bonds, the first time in seven years, on Wednesday and poorer-than-expected retail sales figures on Thursday. However, on Friday's sterling rose against the euro due to inflation issues within Europe but at the same time made losses against the US$ as quarterly UK GDP data showed a larger than expected contraction in the UK economy. The Bank of England's (BoE) monetary policy will again be brought into focus in the coming weeks as a marked increase to UK inflation could help the bank to take a less aggressive stance and put on hold plans for further quantitive easing.

 

The euro which is as €1.0737/£1 which has suffered as a result of events in European states outside of the euro adopted states, continued to falter thanks to major economic deficits and inflation pressures in member states such as Ireland and Italy. Inflation is currently running beyond acceptable levels according to criteria for membership to the single currency in some states and such pressures will surely force the ECB to take action in their meeting on interest rates this week, a cut of 0.5% the widely expected outcome. The euro is approximately 3% down against the US$ over the last week but at similar levels against sterling.