EUR/GBP Rate & Comments for 9th September 2010

EUR/GBP - 1.210

Sterling recovered from 6 week lows against the US dollar after strong housing data and stock market strength that saw global investors buy into riskier assets. Data released by mortgage lender Halifax showed that UK house prices rose for the second month running in August coming in at a 0.2% rise against expectations of a 0.3% drop. Manufacturing production rose by 0.3% in July taking the annual level to the highest level since 1994 which is helping to rebalance the economy away from debt based growth to manufacturing based growth. The main data out today is the Bank of England’s interest rate decision – released at 12:00pm today. Whilst the market expects rates to stay the same and the emergency funding level to stay at £200bn, a recent run of poor data may reignite the debate about expanding the emergency asset purchasing facility to stimulate the economy. The announcement could potentially see some significant volatility if anything unexpected happens. Call in now for a live exchange rate.

In the Euro zone, the single currency fell off against sterling as concerns crept back over the European banking system following an article earlier in the week criticising the European bank stress tests earlier in the year. The ‘spread’ (the difference in interest paid on government bonds vs. a German bond) increased in Portuguese and Irish bonds as uncertainty increased. Investors closely follow bond spreads and widening spreads indicate uncertainty. Final consumer price inflation for Germany (which came in at 0.0% for the month) is the only real data. Expect the euro to trade on sentiment. Call in now for a live price.


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