Weekly Cypriot £ rates and comments - week commencing 17th December 2007

Sterling has been steady and has gained against most currencies apart from the US$. Economic news has been mixed with pressure on house prices and sales volume countered by a surge in production price inflation. The latter means that the market has become unsure on future cuts in UK interest rates. The central banks of the UK, US and Euro land agreed a financing package in an attempt to add liquidity to a market that was/is in danger of grinding to a halt. Still uncertain times and an uncertain future for sterling.

 

 

The Cypriot £, which is pegged to the € which is still the preferred currency when the choice is the US$ or sterling, sits at Cy.£0.809/£1 inter bank. And inflation is also of concern to the European Central Bank. So any cuts in € interest rates are very unlikely short to medium term. But clearly the credit crunch is having an affect on Euro land as the ECB were part of the consortium noted above. And Euro land cannot be immune to the slow down elsewhere. They may not have the overhang of highly priced properties throughout Euro land but businesses need to export and if elsewhere is contracting and the strong € makes these exports less competitive then the € will suffer. Please can all readers note that as of the 1^st January 2008 the € will become the official currency of Cyprus.