EUR/GBP Rate & Comments for 21st June 2010

EUR/GBP - 1.197

Sterling has started the day strongly, rising to a 5 week high against the US dollar of $1.4925/ £1 in early trading. The pound’s strength comes off the back of strong movement in sterling’s favour on Friday, as data showed that the UK’s budget deficit was lower than expected. The UK’s borrowing is still expected to hit 11% of GDP in the coming year, and the main event on the calendar this week is tomorrow’s ‘emergency’ budget which is expected to deliver tough spending cuts and tax hikes. Today’s strength against the US dollar is linked to risk appetite, and many analysts are concerned that there is too much faith in the pound (which has strengthened by over 2% against the US dollar in the last month). There is some anxiety over the pace at which the budget will seek to cut the deficit, as if it is too aggressive, growth could be stifled. Get in touch now to take advantage of current prices, as we could see the pound return towards $1.40/£1 once the markets have had enough time to digest the budget.

In the Euro zone, the single currency had a strong end to the week as concerns eased over sovereign debt problems following stronger than expected demand for Spanish bonds. In addition, there were announcements over bank ‘stress-testing’ that boosted confidence across the region. There is no data out today, but later in the week, there is PMI data that should give a good idea of the direction of industrial production. Call in now for a live exchange rate – especially if you have euros to move into sterling or US dollars, as the euro is higher than it was last week.

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