Weekly Cypriot £ rates and comments - week commencing 12th November 2007

Sterling had a mixed week losing ground against the Euro but gaining against other currencies such as the US$ and the high interest rate currencies such as the Australian $. The Bank of England kept UK interest rates on hold which was expected and we now wait for the minutes of the meeting to see what the emphasis of the meeting was and how close the vote was for keeping or reducing UK interest rates. UK data including house prices and trade figures were on the weak side and as such were a driver in the fall of sterling against the Euro. A lot of UK economic information out this coming week which will make interesting reading with regards to inflation as this will be a significant driver for UK interest rates.

 

The Cypriot £, which is pegged to the €, is still top dog and against sterling sits at Cy.£0.831/£1 inter bank. The European Central bank kept € interest rates on hold and the market expects this to be the case for a while as the ECB battles inflation being over target and a strong € exchange rate which dampens exports. However, the strong € has increased the downside risks to growth significantly and as such there will be a moment in time when the other currencies become stronger but don't expect this any time soon. Still a good time to bring Cypriot £'s back.