EUR/GBP Rate & Comments for 14th June 2010

EUR/GBP - 1.204

Sterling fell sharply against the euro and US dollar on Friday afternoon as weak industrial output figures left investors concerned that the UK might slip back into recession. Industrial output was expected to show a rise of 0.4%, but dropped unexpectedly by 0.4%. Manufacturing production also fell. However, in early trading this morning, the pound is up by 0.4% against the US dollar following strong trade in the Asian markets that has spurred risk appetite. We are seeing large swings in volatility based around risk appetite/ aversion – especially in the run up to the emergency budget on the 22nd June. Today sees the release of the first forecast from the newly formed Office of Budget Responsibility. The OBR’s assessment is likely to show that the previous government’s forecast for growth over the next few years were far too ambitious. This will further press the need for fiscal consolidation. Call in now to discuss a strategy going forward.

In the Euro zone, with sentiment towards the region still poor, today’s highlight is industrial production data which is expected to have risen 0.5% - the smallest rise in 5 months. Whilst this is unlikely to have a huge impact, investors will be keeping a close eye on the figures over the coming months to see whether a cheaper euro is encouraging overseas sales and helping to prop up domestic demand in the region. With uncertainty over the UK budget in the next few weeks, we could conceivably see the euro strengthen against the pound this week. Call in now to ensure you don’t miss out.

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