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GBP-EUR Investor confidence
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Wednesday, 12 November 2008 |
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Last week’s financial news was dominated by Thursday’s shock announcement from the Bank of England of an unprecedented interest rate cut of 1.5% bringing the base rate down to 3%. With such a large rate cut, fears that the U.K economy is in dire straits were confirmed and investor confidence was further battered as the International Monetary Fund said that the U.K. would suffer the worst recession of all the major economies. After an initial brief resurgence in strength on Thursday as the market cheered the decisive rate cut by the BoE, the Pound then hovered just above record lows against the Euro. This Wednesday the central bank is scheduled to release its quarterly projections for growth and inflation and analysts expect that these will prove to be a grim reading for all, as the explanation behind the rate cuts are unveiled.
The ECB also cut rates by 0.5% down to 3.25%. U.K. rates are now lower than Euro rates for the first time since the introduction of the single currency, which has prompted investors to test the Euros highs against Sterling. Euro-zone industrial figures from Germany were weak showing a sharp slowdown in production and orders, this sharp decline will further reinforce expectations of recessionary conditions within the Euro-zone, as Germany make up 25% of the 15 nation economy. This will most likely be confirmed with GDP figures for the whole Euro-zone out this Friday.
GBP/EUR cross lows are expected this week, whether you are buying or selling it would be wise to take advantage of any spikes in the market.
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