Sterling at 5-week high vs euro as ECB keeps easing options open
Sterling rose to a five-week high against the euro on Thursday after European Central Bank chief Mario Draghi affirmed the bank's balance sheet will be expanded to 2012 levels and emphasised ECB policymakers were unanimous in backing further easing measures. After a Reuters report that some national central bankers in the euro area would challenge Draghi over what they saw as his secretive management style and erratic communication, there was talk that he might be losing support for more measures like sovereign bond purchases. But his latest comments suggest the ECB's governing council is committed to further easing measures, including using additional unconventional measures, if needed. On a day when the Bank of England kept interest rates unchanged at a record low of 0.5 percent, Draghi's dovish message led to a drop in the euro across the board. It hit a five-week low of 77.99 British pence and dropped to $1.2393 against the dollar, its lowest in more than two years. "Draghi likely alleviated concerns that he may struggle to successfully lead the governing council to implement more aggressive measures," said Valentin Marinov, currency analyst at Citi. Earlier, the BoE concluded a two-day meeting and kept rates unchanged, as expected. But attention is turning to economic projections the Bank is due to publish on Nov. 12 in its quarterly Inflation Report. Those projections are likely to reflect concern that has grown over Britain's fast- recovering economy since the BoE's last quarterly forecasts, in August. The BoE is likely to be cautious given growing doubts over the euro zone recovery. The euro zone is Britain's biggest trading partner, and slowing growth there could hurt exports and prompt the BoE to keep interest rates lower for longer.
Sterling rose to a five-week high against the euro on Thursday after European Central Bank chief Mario Draghi affirmed the bank's balance sheet will be expanded to 2012 levels and emphasised ECB policymakers were unanimous in backing further easing measures. After a Reuters report that some national central bankers in the euro area would challenge Draghi over what they saw as his secretive management style and erratic communication, there was talk that he might be losing support for more measures like sovereign bond purchases. But his latest comments suggest the ECB's governing council is committed to further easing measures, including using additional unconventional measures, if needed. On a day when the Bank of England kept interest rates unchanged at a record low of 0.5 percent, Draghi's dovish message led to a drop in the euro across the board. It hit a five-week low of 77.99 British pence and dropped to $1.2393 against the dollar, its lowest in more than two years. "Draghi likely alleviated concerns that he may struggle to successfully lead the governing council to implement more aggressive measures," said Valentin Marinov, currency analyst at Citi. Earlier, the BoE concluded a two-day meeting and kept rates unchanged, as expected. But attention is turning to economic projections the Bank is due to publish on Nov. 12 in its quarterly Inflation Report. Those projections are likely to reflect concern that has grown over Britain's fast- recovering economy since the BoE's last quarterly forecasts, in August. The BoE is likely to be cautious given growing doubts over the euro zone recovery. The euro zone is Britain's biggest trading partner, and slowing growth there could hurt exports and prompt the BoE to keep interest rates lower for longer.
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