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Currency Market News

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Currency news this week 090712
09 July 2012

Last week saw the extension of the Bank of England's Quantitative Easing programme, as another £50bn was injected into the ailing UK economy to encourage lending and stimulate growth.

Unfortunately for the Pound, QE effectively dilutes sterling and tends to result in lower exchange rates for international payments. The exception was against the Euro, which weakened again after the European Central Bank cut interest rates to historic lows of 0.75% - giving us the best rates for buying Euros since October 2008.

While we don't expect the Euro to strengthen significantly given the unresolved debt crisis, if you have Euros to buy then now might be a good time to look at securing your rates.

The effects of QE were however felt elsewhere. US Dollar and UAE Dirham rates fell sharply towards the end of last week, and this morning are sitting at their lowest for a month. With the UK economy continuing to struggle, this trend may continue, and sterling has also lost ground recently against the New Zealand, Australian and Canadian dollars, and South African Rand.

This week there is not a huge amount of data due out, although there are some speeches from central bankers around the world. In the UK, the fallout from Barclays' manipulation of interest rates is attracting headlines but has not yet affected exchange rates, although if other British banks become implicated as events unfold there could be bad news for the Pound, specially if the government sees fit to legislate against the City. Bank of England deputy governor Paul Tucker is appearing before MPs on the subject at 3.30pm today.

In Europe this morning, news that Spanish bond prices again breached the key 7% level, are another warning sign to European policymakers whose attempts to plug gaps in Eurozone debt financing are looking increasingly desperate. Euro exchange rates remain very sensitive to any further developments.

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