Euro Pound Exchange Rate Report – 4th January 2011

Read the latest Euro Pound Exchange Rate Report – 4th January 2011

At the end of the final week of the year a beleaguered Sterling limped towards 2011 and managed to steady against the Euro though it remained weak and near seven-week low . After a flat start to the week sterling suffered steep losses on Thursday dropping nearly 2 cents against the single currency throughout the course of the day – traders attributed the losses to little more than year-end related euro/sterling buying. The drop highlights the effects of thin trading which can happen during the festive period.

Sterling steadied against the Euro on Friday, helped by a survey showing an unexpected rise in UK house prices and on the back of euro/dollar buying.

Lender Nationwide said UK house prices rose 0.4 percent in December, the first rise since May. This confounded forecasts for a 0.3 percent fall and suggested the property market was not in steep decline as it was in 2008. Analysts said that despite the data investors remain wary about the fragility of the UK economy and the potential negative impact of the government’s planned austerity measures, which will begin in earnest in 2011.

With trade very thin, however, sterling was driven mainly by movements elsewhere, prodded higher as the dollar came under selling pressure due to reported sovereign buying of the euro against the U.S. currency.

During Prime Minister David Cameron’s New Year’s speech he spelt out that Next year will be “difficult” as the impact of public spending cuts will be felt. But he concluded: “If 2010 was the year we stopped the rot, we can make 2011 the year that Britain gets back on her feet.” Only time will tell for the UK to see whether this is over-optimistic political rhetoric or whether there is some substance to premiership outlook.

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