Euro Pound Exchange Rate Report – 16th August 2010
August 19, 2010 Leave a comment
Sterling rose to a 6 week high Vs the Euro by the end of trade last week to close at 1.2231 from 1.2022 at the beginning of the week. The Euro was the weaker currency out of the two in spite of strong GDP data from the Eurozone and in particular Germany. Euro’s weakness could be attributed to the resurfacing of concern on sovereign debt risk as well as imbalances inside the Eurozone economies.
During the course of the week Sterling rallies were hampered after the Bank of England cut its growth forecasts on Wednesday and predicted inflation would stay below target over the medium term, leaving the door open for more quantitative easing, that was the trigger for Sterling’s biggest daily percentage loss since mid-May, taking it well away from the six week highs reached by Friday.
Next week the domestic economic calendar for Sterling lacks significant market-moving potential. The release of minutes from the Bank of England’s August monetary policy meeting headline, but investors are unlikely to see anything that has not been priced in already after last week’s publication of the quarterly inflation report. The same goes for July’s Consumer Price Index figures, with the third consecutive decline in the annual inflation rate only serving to reinforce the central bank’s well-publicized view.
For the Euro, there are two primary fundamental concerns going forward: whether the economy will expand faster than its peers and the threat of another financial crisis. Between the two dominant themes, financial uncertainty holds the greatest potential for the future. Officials didn’t fix the problems after Greece raced towards default they merely offered a temporary patch that was dependent on investor optimism. It is this precarious position that is exposed through last week’s developments that show a lack of progress with curbing deficits and surviving austerity measures.
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