Weekly Cypriot Pound Rates and Comments - Week commencing 13th August 2007

 

Sterling had a strange start to last week losing a cent and half against the Euro very first thing Monday morning. The explanations as to why the sudden movement happened have been somewhat limited especially given the lack of sterling negative news over the weekend. At the same time, there was a rapid decline in the US$ against the Euro. There has been a partial recovery in sterling during the course of the week but it would seem that sterling is now being identified as a high risk rather than a safe haven asset and, as such, is moving in line with the US$ dollar against the Euro. The flight to safety has been brought about by high volatility in the equity markets and the credit crunch in the debt market which are making investors very nervous.

 

The Cypriot £ is currently sitting at Cy£ 0.860/£1.The Cypriot £ is pegged to the Euro. It was only a couple of weeks ago that the Cy£ pushed up to towards Cy£ 0.87. At one stage, at the start of the week, we were close to Cy£ 0.854. The ECB has made it clear that interest rates will be increased next month by 0.25%. Even though the Euro is very strong against the US$, the German economy is still growing and, as the economic powerhouse of Europe, it means that Euro land is on the up. The strengthening of the Euro against the US$ and sterling was much quicker than anyone could have forecast and we wait to see if it can be sustained.