Weekly Cypriot Pound Rates and Comments - Week Commencing 30th July 2007

Sterling has enjoyed a roller coaster week, hitting yet more 26 year highs against the US$, pushing close to €1.50 and then losing strength towards the end of the week following evidence that the UK housing market was beginning to slow thereby suggesting that the need for further UK interest rate rises in the near term were diminishing.

 

The Cypriot £, which is pegged to the Euro, suffered at the start of the week when it pushed close to Cy. £0.87/£1 inter bank. We are now back at a more "normal" exchange rate of Cy.£ 0.86/£1 inter bank. German business confidence is weakening on the back of the strong Euro against the US$. As the German economy is the key driver for the Euro land economy this is not a positive sign. However, the UK economy must also be suffering from a strong £ against the US$ and so we should not assume that sterling will move back towards Cy.£ 0.87/£1 any time soon.

Weekly Cypriot Pound Rates and Comments - Week Commencing 23rd July 2007

At their last meeting the Bank of England voted by six votes to three to increase UK interest rates by 0.25%. The concern of the three was that we still needed to see what affect the previous increases had had on the UK economy before instigating further increases. They may well be right as UK retail shows some signs of slowing [although torrential rain probably doesn't help]. The general feel in the market is that a further increase of 0.25% is likely later this year but some commentators are now no longer as certain of this as they were.

 

The Cypriot £ [Cy£0.863/£1], which is pegged to the Euro, lost a bit of ground against sterling on the back of the Euro highs against the US$. This is even hurting industry in Germany so goodness knows what pain the French and Italians are having to endure.  However, the European Central Bank is expected to increase interest rates in September to keep on top of inflation so I suspect limited further upside for sterling unless there are some surprises around the corner.

Weekly Cypriot Pound Rates and Comments - 16th July 2007

The Bank of England Limited voted by 6 to 3 to increase UK interest rates at the their last meeting. There is still inflationary pressure in the UK system, which is being exasperated by increasing oil prices, and which will be difficult to curtail without even higher UK interest rates. Another increase in UK interest rates is expected by the end of the year.

 

The Cypriot £ has pushed up to CY£0.865/£1 inter bank. The Cypriot £ is pegged to the Euro and as such moves in line with the Euro vs. sterling. The Euro has been supported by upward revisions to first quarter gross domestic product growth and healthy industrial production in Euro land. The European Central Bank is expected to increase interest rates in September to keep on top of inflation.