Weekly Cypriot £ rates and comments - week commencing 10th December 2007

Sterling lost ground against everything this week. The Bank of England cut UK interest rates by 0.25%. A slight surprise but on the back of weak economic data, including falling house prices and poor retail sales, better to start the cuts earlier rather than too late. There will be further reductions in UK interest rates next year. Will lead to weakness in the short term but longer term probably a plus for sterling.

 

 

The Cypriot £ sits at Cy.£0.808/£1 and is pegged to the € which is still the flavour of the month. The European Central Bank kept Euro land interest rates on hold and even inferred that inflation was still their major concern. Clearly they are dancing to a different beat in Euro land relative to the UK and the USA. I wonder how self delusional the ECB's position is. France and Italy have been complaining about the strong € since the summer and as noted previously the Irish and Spanish property markets are suffering. I still believe sterling is oversold and that it is a good time to bring back Cypriot £'s. We will have to wait and see if I am right.