Pound Surges on Speculation ECB will Raise Interest Rates

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Pound Surges on Speculation ECB will Raise Interest RatesThe pound advanced the most in eight weeks against the euro last week on bets that the European Central Bank will boost stimulus this week amid a debate by Bank of England officials on whether to raise interest rates.

The pound rose 0.8 percent last week to 79.29 pence per euro at 5 p.m. in London on Friday, its strongest advance since the week through July 4. It also hit 79.28 pence, the most since August 13. The pound remained slightly unchanged at $1.6583.

The pound halted its longest losing streak against the dollar since 2008, which saw it decline for seven straight weeks. The pound accelerated after a report indicated that U.K. consumer confidence touched the highest level since March 2005. ECB President Mario Draghi noted that euro-area inflation expectations had plunged, bolstering speculation the central bank may roll out stimulus such as asset purchases in order to combat potential deflation.

“You’ve got Draghi talking about potentially delivering quantitative easing, or a variant, and of course U.K. policy is potentially going in the other direction,” Neil Mellor, a London-based currency strategist at Bank of New York Mellon, told Bloomberg News.

Yield on the target 10-year gilt declined 0.04 percentage point or four basis points, to 2.37 percent, having declined 23 basis points in August, the most since January. The value of the 2.75 percent bond that matures in September 2024 stood at 103.385 percent of the face value. The U.K. Debt Management Office intends to table 4 billion pounds worth of bonds that mature in 2020 for sale on September 2. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com