Latest on Sterling and the Euro by Charles Purdy Sterling has been steady for the last month or so. This even after the doom and gloom of the Bank of England’s economic forecast which showed increasing inflation and slower economic growth. This was the worst result possible. The effect of high inflation is that interest rate cuts become less likely. The market feels that we will see only two further 0.25% cuts this year which is hardly going to get the economy moving into overdrive. House prices continue to tumble. But at least it makes it clear to everyone the depths of the problems that exist and sterling can only move forward once this is clear to all. There is mixed economic news for the Euro, which sits around €1.25/£1 inter bank. The German economy continues to move forward strongly whereas the Spanish economy has hit the buffers. Also inflation continued to be at the high end of the European Central Banks target. As such, any cuts in Euro land interest rates in this current year are thought to be very unlikely. However, economic problems will increase as the year continues, which may well reduce inflation and then Euro land interest rates would be reduced. This however is not going to be the short term scenario. So...no significant weakness for the Euro short term. To get a Better-than-Bank
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