Pounds gains limited against stronger Euro

28th January 2011
Good morning. Sterling gained a little against the US Dollar and Euro yesterday on expectations the Bank of England could raise interest rates by mid-year. Poor US data weakened the dollar also. A stronger Euro however meant that gains were limited. Today at 08:30am rates are as follows:

Pound steady on BoE minutes

Sterling has found support after minutes of the Bank of England's (BOE) January meeting on Wednesday showed BoE policymaker Martin Weale joined Andrew Sentance in voting for a 25 basis point rate rise from a record low 0.5 percent.

Analysts said the additional vote to raise rates prompted investors to price in the rising likelihood of an increase in coming months. However, some said weakness in the UK economy, highlighted by news this week of a shock contraction in gross domestic product late last year, would cap the Pound's gains. However some analysts argue stubbornly high price pressures at a time when the economy struggles to recover raises the possibility of stagflation, which would drag the pound lower.

So there is still conflicting opinion on Sterling and this will keep rates very volatile

Sarkozy gives support to Euro

French President Nicolas Sarkozy insists Europe will never give up on the euro, despite widespread fears for the currency's future. Economists have voiced concerns that ongoing debt crises in Greece, Ireland, Spain and Portugal could spell the end of the single European currency.

"We will never abandon the Euro. Never! "Euro spells Europe, the euro is Europe. Europe has meant 60 years of peace on our continent. We will never abandon that." Sarkozy said the euro was central to European unity.

And he had a warning for currency speculators and those apparently keen to see the Euro's troubles continue. "For those who wish to wager against the euro: Be careful how you invest because we are determined."

The comments gave some strength to the Euro and stopped the pound gaining much against the single currency.

Pound vs Euro summary

Those that need to buy Euros and are hoping for an increase in rates should be concerned that with negative UK growth, analysts think Sterling could get weaker in the short to medium term. it has mainly been Euro weakness that pushed rates to €1.20 in recent weeks.

Now the Euro has more support, it's unlikely to weaken significantly further. Given the poor UK data there isn't much that could make Sterling gain.

We therefore think that there could be more falls in the GBP/EUR rate. If you are worried about falling rates, contact us today to find out about our exchange rates and contract types that can protect against adverse rate movements.

If you are looking for the best exchange rates, click the link below to send us an enquiry, and see how good our rates are.

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