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Friday, 12 May, 2000, 16:01 GMT 17:01 UK
The currency stampede
euro and pound coins
The euro has improved against a weaker pound
By business reporter Jonty Bloom

For those of you who, like me, love those old black and white movies, this week's Eurowatch will be about a familiar image.

In those great Westerns about cattle ranching, John Wayne normally leads his steers on a long trek to the railhead.

One of the biggest dangers is a stampede.

The cows are happily chewing grass when suddenly a gun goes off.

They all dash off in one direction and, after a bit of drama and crisis normally involving the "chuck wagon" being wrecked, they all stop as suddenly as they started and start chewing grass again.

Until, that is, another shock, a bolt of lightening perhaps, sends them off in another direction.

You must be wondering by now what this all has to do with the euro!

The answer is that the markets and the foreign exchange markets are no different from any other market, in that sometimes they act like a herd of cattle.

When economists and politicians say that you can't buck or control the world's financial markets, just think of John Wayne and a herd of stampeding cattle.

He doesn't try to stop them in full rush, he waits until they have tired themselves out and then rounds up the strays.

He certainly is never stupid enough to stand in front of them.

Sterling slides

This week the pound actually fell against the euro, even though the ECB held interest rates unchanged on Thursday.

The European Central Bank did however hint that it may increase rates in the future if the low value of the euro threatened price stability.

Given the fall in the euro since it was launched at the beginning of last year, that was the least that it could do.

The fall in the value of the pound was more down to the Bank of England which suggested this week that interest rates in Britain may have peaked.

For once such comments seem to have an effect on the market, not because anyone is saying anything new but because the markets seem to have been listening this time.

Presumably it is something to do while chewing grass.

But that doesn't mean we know which way the stampede will head next time.

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See also:

07 May 00 | Business
Euro watch
02 May 00 | Business
The euro drive for reform
20 Apr 00 | Business
Greece's euro gamble
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