Interest rates for Sterling will remain low for several months, thus money markets want to invest in higher interest loans. Add the scares of a double-dip recession in the UK, falling house prices, reduced lending to companies and all is not rosy.
Personally I would love it if Sterling went to 0.5EUR...
I noticed the financial wizards forecasting Euro doom this year have been rather quiet of late.
Why do you think something has gone wrong? Markets go up and down - but they are always right. At the end of the day Ireland and Greece are just a tiny fraction of the European economy, and folks need to be objective when comparing news headlines.
I said a few months back that if Sterling reached 1.25 I would cash in Sterling assets for Euros - it did'nt make it, peaking at just below 1.24 so I still have too much in Sterling right now. Nobody (except a couple of mongs on here) thought it had the legs to really creep up in value into the 30's - especially with more stimulus to be gained by keeping it low.
But I did not expect to see a sustained drop below the high teens.
I think the Euro will be dropping again before year end - but now there are question marks against the $ and Sterling, so you need to watch other indicators. The obvious CHF and Yen are also on a weird curve, so you could give yourself a headache quite easily.
Sterling is for sure 20% undervalued against the Euro - but as to exactly when it will make that up is anyones guess, and it certainly will not be linear as everyone is too jumpy.