The pound advanced for the second consecutive week against the euro as the market speculated that UK’s central bank may soon hike interest rates. The euro wasn’t helped by signals from the European Central Bank that it may boost stimulus.
The pound surged 0.7 percent over the past week to trade at 81.67 pence a euro at the close of trade in London. It hit an intraday high of 81.63 pence, its highest since February 17. The sterling fell 0.1 percent to $1.6848. The week saw it touch $1.6996, its strongest level since August 2009.
The pound was helped by data that showed that UK’s services industry grew more than expected in April. British government bonds plunged after the National Institute of Economic and Social Research and the Organization for Economic Cooperation and Development revised upwards their estimates of Britain’s growth.
“You have the ECB looking to eventually ease while for the Bank of England the market is trying to gauge the timing of a rate hike,” John Hardy, the Copenhagen-based head of foreign-exchange strategy at Saxo Bank A/S told Bloomberg. “Assuming you get more supportive data out of the U.K. and especially if there is a stepping up of rhetoric next week at the Bank of England, euro-sterling should head to new lows.”
The Bank of England is expected to release its quarterly Inflation Report this coming Wednesday. The report includes economic predictions. Economists predict that the British central bank will hike borrowing costs within 12 months to support the pound. They also expect Britain’s unemployment rate to decline to 6.8 percent in the first quarter. Official employment data will also be released this coming Wednesday. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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