EUR/GBP Rate & Comments for 21st April 2010

EUR/GBP - 1.144

Sterling rose yesterday as inflation rose more than expected. Consumer prices rose 3.4% on the year against an expectation of 3.2% and retail prices rose by 4.4% against an expectation of 4.1%. This unexpected jump fuelled speculation that the Bank of England may look to raise interest rates in the fourth quarter. The pound hit a high of $1.543/ £1 and 1.1436/ £1 but was held back from moving any higher by concerns over the election. Unexpected support for the Liberal Democrats has prompted renewed speculation that a hung parliament would leave the next Government with no clear majority to pass the tough legislation required to clear the UK’s record deficit. Today we have unemployment data and the minutes from the Bank of England’s recent meeting. With sterling seemingly having difficulty in holding above 1.140/ £1 and with the uncertainty of election, it might be worthwhile taking advantage of prices at that level. Call in now for a price.

In the Euro zone, a large amount of positive data was released yesterday. The trade balance came in almost 2bn better than expected, manufacturing prices rose and economic sentiment jumped by almost 10 points on last month following the Greek bailout agreement. However, despite the positive data, the euro suffered as investors remained wary of buying the single currency as the risk from debt default in the region remains high. As a result the euro fell against both sterling and the US dollar. Given that the risk of default by Governments in the region remains high, the euro is unlikely to push much further against sterling. If you need to move euros into sterling/ US dollars – it might be worthwhile looking at doing this now and avoiding the markets moving against you.

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