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Hi All,

As promised here’s an update on what’s been happening with the Euro over the last week.

With the additional quantitative easing shock wearing off, Sterling started to recover again last week, particularly after the UK’s CPI inflation rate failed to fall as expected, asking questions of Mervyn King’s worries over the deflation threat. By Wednesday GBP/EUR was back above 1.17, even though a strong German ZEW economic sentiment survey appeared to show that Germany was building upon its Q2 emergence from recession.

The markets then received another Bank of England tremor when they revealed that further to the additional easing shock, 3 members of the MPC, including the Governor, had voted for £75 billion! The accompanying comments reflected the view that ‘the risk of doing too little was far greater than doing too much’. Sterling fell back towards 1.16 on this news.

A +0.4% rise in the official retail sales data for July (+3.3% pa) could have added support for Sterling but instead a sharp deterioration in public finances, a July deficit of £8 billion compared to a £5 billion surplus in June, caught the attention of traders and the press. July is traditionally a strong month for receipts and there has not been a monthly deficit since 1996, however we must remember the Government has been using the tactics of ‘whatever it takes’ to pull us out of what was expected to be a catastrophic recession so this result was hardly unexpected.

Friday brought more downward pressure on GBP/EUR as the flash estimates of the EU service and manufacturing sector surveys climbed again to within a few points of the key 50 expansion level. Within that EU number, both Germany (service) and France (manufacturing) did sneak above 50, helping to validate the surprise Q2 GDP releases.

Euro Movement – High’s & Low’s of last week (17/08/09 - 21/08/09)

High’s: 1.1733
Low’s: 1.1493

A movement of: 2.09%

Difference on £200k

High: € 234,660
Low: € 229,860

Difference of: € 4,800

Whilst FX isn't the most thrilling of subjects, the sooner you begin to think about your money transfers, the more likely you are to make your money go further.

A further update will be added next week.


Jon Sermon
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