Weekly € rates and comments – week commencing 5th May 2009

Last week was a quiet week for economic data or developments and the UK news headlines was instead dominated by events involving the potential swine-flu pandemic rather than the ongoing global recession. There have been some encouraging signs that sterling has now reached and returned from the bottom of its value on the currency markets. Prices have maintained recent improved levels despite a lack of positive market data to support any substantial upturn in the economy other than the sustained increase in manufacturing over the last 3 months. This week bares little to nothing more in terms of major economic data for sterling other than the Bank of England's monthly decision on interest rates where the broad expectation will be for another hold at 0.5%.

 

 

The euro sits at €1.127/£1 inter bank. Major Euro-zone economic data was sparse last week and the figures which were released, such as German unemployment and inflation data, were much as expected. A positive week for European equities helped to increase confidence that perhaps the worst of the down-turn is behind Europe but this may well prove to be overly-optimistic. This week we will see the European Central Bank's (ECB) monthly decision on interest rates with a cut of 0.25 % on the cards. Persistent rumours of quantitive easing as a means to stimulate parts of the stalling Euro-zone economy have kept the euro under pressure recently so any mention of this in the accompanying statement with the decision on interest rates may prove to be damaging to the euro in the short to medium term.