Financial Markets Analysis by Lloyds TSB

Sterling rises to a 2-month high against the euro

Sterling rises to a 2-month high against the euro

Volatility in currency markets declined for a second consecutive week, falling to the lowest level since last September. An easing in credit market tensions to levels prior to Lehman Brothers’ default and positive Q1 earnings results from US banks helped to shore up market confidence.

€/£ fell below 0.88 for the first time since 24 February, dragged down by comments made by ECB president Trichet and weak euro zone economic data. Evidence of a growing divide on the ECB governing council could make it harder for the central bank to agree on May 7 with regard to interest rates and non-standard policy measures.

US retail sales, housing starts and building permits dropped more than forecast in March, but the Fed Beige Book took stock of a stabilisation in activity in five of the twelve Fed districts since March instead.

The Indian rupee strengthened to a 2-month high vs the dollar as general elections got underway. $/rupee fell below 50.0 to a 49.3250 low on Thursday. £/rupee ended the week virtually flat at 73.90.

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