Weekly € rates and comments – week commencing 20th July 2009

Sterling continued on what has been a frustrating and rather uneventful past fortnight and traded in a relatively narrow range against most major currencies including the US$ and the euro. UK Inflation data at the start of the week indicated only what the Bank of England (BoE) has told us to expect over recent months with the target of 2% being undershot marginally. However, a steep rise in unemployment over the month of June kept sterling under pressure throughout the middle of the week with little else in terms of significant market data releases later on in the week. On Friday the International Monetary Fund (IMF) compounded matters for sterling with comments regarding the vulnerability of the UK economy due to its dependence on the fragile and publicly supported financial sector. Green shoots are simply not enough for sterling at the moment. This week's key economic data is as follows. On Tuesday the public sector net borrowing figure for June is expected to exceed £20bn and then on Friday we have the preliminary second quarter gross product figure which is expected to show a fall of over 5%. Shocking figures but given the fallout over the last 12 months it is very difficult to surprise anyone now.  The only positive is thought to be the release of June figures for house purchase loans which is expected to show a significant increase.

 

 The Eurozone produced very little significant market data this week other than an inflation report which was much in line with expectation. The euro currently sits at €1.160/£1 inter bank. However, in this quiet week the euro also benefited from the rise in equity markets worldwide and made modest gains against the US$ and sterling. Industrial output figures for the Eurozone demonstrated a marginal increase on the previous month but there are more noticeable signs of a sustained down-turn for the rest of the year and most of 2010 when studied more broadly. This week we have producer prices, purchasing managers indices and the IFO business climate index for Germany released. Given its status as the world's greatest exporter they will make for interesting reading.