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- American focus: the pound has gained support.
American focus: the pound has gained support.
The pound climbed to a two-week high versus the euro after the European Central Bank left its main interest rate at a record low, damping bets the common currency’s yield advantage over the U.K. will widen.
Sterling appreciated against most of the 16 most actively traded currencies monitored today, reaching a three-month high against the dollar. The ECB left the benchmark rate at 1 percent for a 22nd month while President Jean-Claude Trichet, who last month announced he would do what’s necessary to contain inflation, said rates are “appropriate” for now as price pressures remain balanced.
“The market was expecting a step up in the hawkishness from Trichet and that never happened, which is why the euro is coming off,” said Audrey Childe-Freeman, a head of European currency strategy at JPMorgan Chase & Co.’s private bank in London. “With the more encouraging economic data coming out of the U.K. the expectations for a U.K. rate hike could move forward and that’s providing sterling with some upside, especially against the euro.”
The pound appreciated 1.1 percent to 84.38 pence per euro, the strongest intraday level since Jan. 20, before trading at 84.45 as of 5:07 p.m. in London. Britain’s currency was 0.3 percent weaker at $1.6152 after earlier gaining 0.5 percent to $1.6279, the strongest since Nov. 5.
Euro-area inflation is already in breach of the ECB’s 2 percent limit, accelerating to 2.4 percent in January, the fastest in more than two years. Inflation expectations remain “firmly anchored,” Trichet said today.
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