EUR/GBP Rate & Comments for 13th July 2010

EUR/GBP - 1.196

Sterling fell against the US dollar on Monday after concerns resurfaced over the UK’s triple A credit rating. Standard & Poor’s said it was maintaining the negative outlook on Britain’s economy as the challenging spending cuts announced in the recent emergency budget have yet to be made and the economy may not grow as fast as the government has predicted. Despite the recent budget announcement, the government has yet to implement the required spending cuts and this is what concerns the credit rating agency. Elsewhere, GDP for the 1st Quarter remained unchanged at 0.3% and the current account deficit unexpectedly jumped by £5bn. The key data today is the UK inflation figures, which are likely to show a decline from last month’s annual rate of 3.4% - reflecting the spare capacity of the economy. Mervyn King has been saying for some time that inflation will fall off through the year – justifying his decision to keep interest rates and the asset purchase programme on hold. Call in now for a live exchange rate.

In the Euro zone, news has just been announced that Portugal’s credit rating has been downgraded. This reflects the ongoing concerns over sovereign debt in the region, and yesterday saw the euro give back gains to the US dollar and pound on concerns on what bank ‘stress testing’ would uncover. Recent euro strength – against sterling and US dollar – has been seen as a reflection of weakening prospects in the UK and the USA and not as a reflection of any reduction in the issues surrounding sovereign debt in the region. Out today, there is economic sentiment data released. Call in now for a live exchange rate.

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