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Hints that EUR may slide again

Hints that EUR may slide again

Mervin King and his MPC colleagues announce their interest rate decision at 12 GMT. Markets expect rates to remain on hold with the UK economy appearing too fragile to deal with higher rates just now. Whatever the committee decide, they are dammed if they and do dammed if they don’t, with criticism from inflation hawks wanting inflation tackled now or inflation doves who want rates to remain low to support the struggling economy.

 Over the medium term, the market is expecting interest rates to rise by 2% by the end of 2012. When I say ‘the market’ I mean there are financial instruments trading in the market that help to provide an estimate of where rates may be going. So if interest rates did rise by 2% by the end of 2012, what would this mean? Well, it would add about £170 a month to the cost of a £100,000 25 year mortgage, which is a rather ominous sign giving people’s incomes are already being squeezed by VAT hikes, rising fuel and food prices. With up to 90% of UK homeowners on a variable rate mortgage this would take more money out of people’s pockets, which they don’t have to spend on our struggling high street.

 Across the English Channel in Europe and they are not experiencing plain sailing either with the EU’s sovereign debt crisis beginning to rear its head again. Portugal, the latest country to experience difficulty, moved closer to the brink yesterday with interest rates on their 10 year bonds reaching 7.8%. The Secretary of the Portuguese Treasury admitted himself that this  level of the interest was ‘not sustainable over time’, but denied his country needed to be bailed out insisting the EU need to take urgent measures to restore market confidence. This may sound simple in theory, but in practice he faces resistance to implement new measures form a number of EU countries, most importantly Germany.

 In overnight trading, the concern over the EU’s debt crisis and their apparent inability to reach agreement on how to resolve it meant the euro was weaker against the pound with GBP/EUR at 1.1682. The euro was also trading lower against the dollar at 1.3833. In a busy day for UK and US economic releases the pound traded slightly lower against the dollar at 1.6168 – with the dollar benefiting a little from ‘safe haven’ buying as the Libyan crisis continues. Apart from the all important BOE rates decision at 12 GMT keep an out for UK manufacturing and industrial production figures released today for signs that this sector of the economy continues to recover.

What does this all mean for me? Well buying your EUR, USD, AUD or any other currency at the wrong time could cost you a fortune. There is no crystal ball but Currency UK can give you the information you need to make an informed decision.

 

Currency UK will then offer you the best exchange rates available and ensure that you subsequent international transfers are handled as quickly and as efficiently as possible.

 

Contact us us now on +44 (0)20 7738 0777 or click here 

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