Euro Sterling – pound nearly hits 12 month low
April 18, 2011 Leave a comment
18th April 2011 – Euro versus Sterling, the pound nearly hits a 12 month low.
The pound continued its downward trend against the Euro last week, with lower inflation figures from the UK weakening Sterling. At one point rates were near a 12 month low, before staging a small recovery at the end of the week:
The Consumer Price Index (CPI) figures released last week showed a fall in inflation for the first time in 8 months. The fall in food and soft drink prices was the main cause. The figure was lower than most analysts had expected, and lower inflation means that initial expectations of a rate hike in the UK have now been pushed back to November.
Latest Euro Pound Exchange Rate Graph – 18th April 2011
Earlier in the year the consensus was for a rate hike in the UK as soon as May, to combat rising prices. The latest numbers however have pushed this expectation back to the end of the year. The news weakened Sterling and pushed GBP/EUR rates close to the lowest in 12 months.
Adding to Sterling’s woes was a survey last week showing the biggest drop in retail sales in nearly 6 years, highlighting the problems facing the UK as the government’s tough austerity measures hit consumer spending, and jobs data on Wednesday will also be closely watched.
“The economic data that we’ve had out of the UK gave a lot of ammunition to sterling bears,” said Audrey Childe-Freeman, EMEA head of currency strategy at JP Morgan Private Bank. “Lower-than-expected inflation, weaker growth, that’s taking off pressure from the BoE to raise interest rates and Sterling is a loser in that environment.
We’ll know a bit more about the Bank of England’s take on interest rates this Wednesday when the minutes to the recent decision to hold rates are released. These minutes released at 09:30am on Wednesday will show how the 9 member committee voted including differences of view.
As the chart above illustrates, there was some respite to the downward trend, with a slight recovery in rates towards the end of the week as the EU’s debt problems resurfaced. Following Portugal’s request for support, there was speculation Greece would again have to re-structure its debts, weakening the Euro slightly.
In summary, rates are low and despite slight Euro weakness, interest rate expectations have and will continue to drive rates. With markets closed on Friday and next Monday for Easter and limited UK data being released this week
If you have yet to open a trading facility to gain access to commercial rates of exchange click here to open an exchange rate account today and an experienced trader will be in touch to discuss your requirement and offer expert market knowledge.