Sterling hit a one month high against the euro yesterday of €1.1748/£1, coming close to the highest level since March after a German official played down market expectations of a comprehensive solution to the euro crisis being announced on Friday. Weak industrial data for the UK was largely ignored as the focus intensifies on the outcome of Friday’s summit. Industrial output slipped at the fastest pace in 6 months in October, raising further concerns over the UK recovery as the economic picture deteriorates further. The Bank of England announces this week’s interest rate decision later today and is not expected to make any changes to monetary policy this month.

In the euro zone, the euro fell after a German official said that Berlin was becoming pessimistic over the likelihood of a comprehensive solution being announced on Friday as many governments failed to grasp the gravity of the situation. A key focus of the summit is the level of progress towards fiscal integration whilst minimising the moral hazard of any political changes. The European Central Bank is widely expected to cut interest rates today so call in now for a live exchange rate.

In the USA, the US dollar yet again took a back seat to the European debt crisis and the build up to Friday’s EU summit and today’s (expected) interest rate cut. Barclays Capital yesterday amended their US dollar/ sterling forecasts to reflect a general movement from euros towards the US dollar over the coming months, meaning that sterling is now expected to drop steadily towards $1.50/£1 over the next 12 months. Call in now to avoid losing out.

Elsewhere, the Australian dollar strengthened yesterday after GDP growth figures came in at 2.5% - beating expectations by nearly 1%. Australian growth has been strong, yet the Reserve Bank of Australia has begun to cut interest rates to cope with potential slowing demand from China.

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