Weekly € rates and comments – week commencing 22nd June 2009

Sterling's upward momentum stalled last week largely due to weaker than expected UK retail sale figures as well as the detail in the Bank of England's (BoE) meeting minutes from earlier this month suggesting quantitive easing and asset purchases were still part of their plans despite the recent upturn in confidence. The BoE has also been deliberately quick in trying to put the recent surge from sterling and the improving economic data in perspective and have warned of new and persistent problems which may arise as a hangover of the rather epic down-turn of the last year. Better-than-expected inflation data and a rally in equity markets would certainly have helped sterling claw back its midweek losses and close last week within a cent of its highest value against the euro in over 6 months. This week there seems a dearth of UK economic data. Today we have various housing indices which are expected to show house prices are still falling. No surprise then but the level of the fall will be watched with interest.

 

The euro has retraced on some of its recent gains against the US$ since the start of June and is still in a downward trend against sterling. Despite no particularly negative or outstanding results in Eurozone market data the rate of contraction in the Eurozone economy has proven to be rather sharp since the start of 2009. Attention last week fell on the Eurozone banking system which is expected to face massive financial losses and prove in some terms the lagged reaction to the global economy that may keep the entire region under pressure whilst other parties eye the end of the crisis. Tomorrow we see the purchasing managers indices for the euro zone released with the expectation that the rate of contraction will have slowed rather than moving into growth.