Sterling close to 7-year high versus euro, as Eurozone weakens again

British sterling has touched a peak of 1.3811 versus the euro today.

by Brian Miller

British sterling has touched a peak of 1.3811 versus the euro today, literally just a fraction of a cent below its strongest since December 7th 2007, or 7 years and 3 months. This is because a range of Eurozone economic data has disappointed today, including French unemployment hitting an all-time high, and German factory orders slumping in January.

Euro stays on the back foot, as French joblessness climbs, while German factories make less

The pound to euro exchange rate remains high today, first because French unemployment climbed +0.1% in the last 3 months of 2014 to +10.4%, according to statistics body ILO. This is the highest jobless rate since comparable statistics began in 1998, and so clearly augurs ill for France’s economy and job market, thereby weakening the euro.

What’s more, the euro also stayed low today, as orders in Germany’s factories shrank –3.4% in January, according to the official Deutsche Bundesbank, far more than the –1.0% looked for. Thomas Harjes, senior European economist at Barclays Plc in Frankfurt, notes that “Manufacturing activity in Germany appears to remain rather subdued in contrast to the surge in domestic retail and service-sector activity.” Given that manufacturing makes up for a large chunk of Europe’s largest economy, this has also hurt the common currency.

Euro may stay weak, as de Guindos hints at 3rd Greek bailout, while ECB to elaborate QE

What’s more, looking to the immediate future, sterling may stay close to 7-year highs versus the euro. First, this is because Spain’s finance minister Luis de Guindos told a press conference in Barcelona yesterday that the Eurozone is planning a third bailout for Greece. Mr. de Guindos said "We have given ourselves these four months to, one, see what the real situation is, to see how Greece has met conditions and to try and establish what happens next (...) which is fundamentally a third rescue.”

In addition, the pound could keep its advantage versus the euro, because the European Central Bank is expected to elaborate its €1.1 trillion emergency monetary stimulus scheme today, technically called quantitative easing, or QE. This may weaken the euro, because electronically printing money in such vast quantities dramatically drives down the value of the euro. Robin Brooks, chief currency strategist at Goldman Sachs Group Inc, for instance says that “The combination of deposit rates negative and QE is a very potent one, so it’s very euro negative.”

Pound equals strongest versus euro in 7 years, 3 months, on UK hiring

Sterling has equaled its strongest versus the euro in 7 years and 3 months today.

by Dave Pewes

Sterling has equaled its strongest versus the euro in 7 years and 3 months today, or since December 7th 2007, at 1.3816. The pound has risen, because the UK’s enormous services sector hired at the second fastest pace on record in February, while fears of a Greek exit from the Eurozone have hit their highest in 2 years.

Sterling rises, as UK services hiring accelerates, though growth eases

Sterling has equalled its 7-year high versus the euro today, as the UK’s gigantic services sector hired new workers at the second fastest pace on record last month, according to economics body Markit. Markit’s measure of UK services hiring hit 57.1 in February, far above the 50.0 line that divides growth from contraction, and second only to last July’s all-time high. This lifted sterling, because it indicates that British services firms expect to be busier, pointing to faster economic growth in the UK.

Chris Williamson, chief economist at Markit, said that “The combination of relatively robust economic growth, the improving labour market and signs that wage growth will pick up in coming months suggests the Bank of England will come under increasing pressure to tighten policy later this year.”

However, in spite of this, UK services output in fact increased less quickly in February, according to Markit. UK services output hit just 56.7 last month, well into growth territory, yet below January’s 57.2 figure, as well as the 57.5 consensus forecast among economists. So this may take the shine off sterling a little.

Euro weakens, as fears of Greece exit from euro hit 2-year high

Moreover, the pound also touched 1.3816 today, because concerns that Greece will exit the Eurozone have reached a 2-year high, according to a new poll of investors by economics group Sentix. Sentix’s newest poll of 900 individuals and institutional investors found that there was a 37.1% chance that Greece will abandon the euro, far higher than last month’s 22.5% figure, and the most since March 2013.

Sebastian Wanke, a senior analyst at Sentix, noted that "The new aid programme for the country does not seem to be convincing, rather a Grexit is now bound to be a constant topic among investors for the months to come.” This is therefore helping to lift sterling to new heights versus the euro.

Sterling drops from 7-year high, as German economy booms

The UK pound has slid –0.59% versus the euro today to just 1.3735.

by Sam Hewitt

The UK pound has slid –0.59% versus the euro today to just 1.3735, more than half a cent below yesterday’s 7-year high year.

This is chiefly because Germany’s economy is showing signs of positively booming, with retail sales flying. Meanwhile, Britain’s forthcoming general election in May is weighing on the UK economy.

Euro climbs, as German retail sales rocket

Sterling has weakened today, first because sales in Germany’s shops flew +5.3% in January year-on-year, according to official body Statistisches Bundesamt Deutschland, far exceeding +2.7% forecasts.

This was the quickest rise since January 2008. and comes as little surprise given the inflation-busting wage hikes that German workers have been enjoying. Recently for instance, Germany’s largest union IG Metall negotiated a +3.4% pay rise for its members, at a time when inflation is falling.

Christian Schulz, senior economist at Berenberg Bank notes that "Private consumption looks set to be a major growth driver in 2015” in Germany. Hence, the rising euro today.

Pound falls, as election uncertainty weighs on UK construction firms

Meanwhile, sterling remains on the back foot today, because it seems that election uncertainty is keeping UK construction firms from hiring and investing, in spite of faster growth in February.

UK construction expanded 60.1 last month, according to economics body Markit’s measure of growth, faster than 59.0 forecasts, and a 4-month. With Markit, a figure above 50.0 points to expansion, while anything below means contraction. This suggests that UK construction is reviving at the start of 2015, and as Markit economist Tim Moore notes, “growth picked up further from the soft patch seen at the end of 2014.”

However, the pound failed to benefit from UK construction’s renewed growth, because there are signs that builders are holding back, ahead of the UK’s May general election. For example, Markit’s Tim Moore also added that “some construction companies noted that the uncertain general election outcome could prove a temporary bump in the road for new work."

Moreover, UK construction accounts for just 6% of Britain’s economic output, a very small percentage, which also explains why sterling remains lower today.

Pound hits 7-year high, but may have peaked, as Eurozone recovers

The pound to euro exchange rate has touched 1.3803 today, its strongest since December 7th 2007.

 by Peter Lavelle

The pound to euro exchange rate has touched 1.3803 today, its strongest since December 7th 2007, or 7 years and 3 months. This is chiefly because UK manufacturing output hit a 7-month high in February, while Greek finance minister Yanis Varoufaki continues to imply the risk of Greece exiting the Eurozone.

However, in spite of this, sterling may have now peaked versus the euro, as both Eurozone deflation and joblessness fell recently, while the UK housing market underperformed last month.

Pound rises, as UK factories accelerate, while Varoufaki defies austerity

Sterling hit 1.3803 today, first because the UK manufacturing sector’s Purchasing Manager’s Index (PMI) hit 54.1 last month, according to economics group Markit. This was well above both the 50.0 line that divides growth from contraction, the 53.4 consensus forecast, and also constitutes a 7-month high. It suggests that the UK’s factories are resurgent in early 2015, thereby strengthening sterling.

At the same time, the pound has climbed versus the euro, because Greek finance minister Yanis Varoufaki  told Athens radio station Parapolitika 90.1 today that "If they [the Troika of Greece’s financers] ask me to continue with the work of austerity I won’t do it.” This tells us that it’s still possible that Greece will exit the common currency, should the Eurozone ask too much of Greece, and explains the euro’s fall.

Sterling may weaken, as Eurozone deflation eases, while UK mortgage approvals disappoint

However, 1.3803 may wind up being sterling’s peak versus the euro, at least in the immediate future. This is because, first, Eurozone deflation eased to –0.3% last month, according to official statistics body Eurostat, beating predictions of a –0.5% drop. This suggests that prices aren’t falling so rapidly in the common currency zone as financial markets expect.

Second, sterling may also have peaked versus the euro, because Eurozone unemployment unexpectedly fell –0.2% in January, to 11.2%, the least since April 2012. This indicates that Europe’s job market is slowly gaining traction, and that, as Bill Adams, senior international economist for PNC Financial Services Group notes, “the latest labor and price data for the Eurozone look less awful.” This may support the euro, therefore.

Last of all, sterling may fall thanks to UK weakness in the near future too, because Britain’s lenders approved just 60,786k new mortgages in January, according to the Office for National Statistics, more than -200 less than forecast. As George Buckley of Deutsche Bank puts it today, this indicates that "Housing remains sluggish” in the UK, and this may stop sterling from scaling new heights, at least for now.

Pound hits another 7-year high versus euro, as Grexit fears grow

The pound has touched yet another 7-year high against the euro today, at 1.3776.

by Jane Fisher

The UK pound has touched yet another 7-year high against the euro today, at 1.3776, its strongest since December 21st 2007. This is chiefly thanks to growing doubts that Greece will still be part of the Eurozone at the end of this year.

For instance, sterling has climbed versus the euro, because the head of European sovereign ratings at Standard & Poor’s Moritz Kramer has said today that “The original cohesion that has been driving [Greece’s extreme-left wing Syriza government] may start to become a little more brittle. It will become an increasingly difficult balancing act for [Prime Minister Alexis] Tsipras to hold his coalition together.” This suggests that the political climate in Greece is fragile at best, putting into doubt Greece’s future in the euro.

Moreover, the euro is also falling today, because Germany’s patience with Greece is apparently coming to an end. Germany’s biggest-selling tabloid Bildzeitung this week published a headline “No more billions for greedy Greeks.” Meanwhile, German finance minister Wolfgang Schäuble this week expressed his doubts that Greece’s government can be trusted to meet its commitments, saying “There’s a lot of doubt in Germany.” This also weighs on Greece’s euro membership today, thereby weakening the common currency.

Pound hits another 7-year high, as UK growth confirmed at +2.7%

UK sterling has hit yet another 7-year versus the common currency today, at 1.3685.

by Jack Smith

UK sterling has hit yet another 7-year versus the common currency today, at 1.3685, its strongest since December 21st 2007. The pound has risen, because UK economic growth for 2014 was confirmed at +2.7% today, the most since the financial crisis, while European Central Bank chief Mario Draghi yesterday warned that the Eurozone’s monetary union is structurally incomplete.

Sterling continues to rise, first because it was confirmed this morning that the UK economy grew +2.7% last year, according to the Office for National Statistics. This was Britain’s fastest annual growth rate since the 2008 financial crash, and so bodes well for the UK’s economic trajectory, thereby lifting sterling.

At the same time, the euro remains on the back foot, because yesterday president of the European Central Bank Mario Draghi told the European Parliament that “We have not yet reached the stage of a genuine monetary union.” Mr. Draghi emphasised that, unless the 19 members of the currency bloc agree to share further economic sovereignty, this “puts at risk the long-term success of the monetary union.”

Equally, European Central Bank executive Luc Coene also brought the future of the euro into doubt yesterday, by telling Dutch newspaper De Telegraaf that "If a country decided to leave, why shouldn't it be allowed to happen? I can't imagine what country that would be, but theoretically that can always happen." This also brought the euro low.

Pound nears new 7-year high versus euro, as BoE hints at rate hikes

The pound is rising, as the Bank of England hints that it may hike interest rates.

by Brian Miller

Sterling stands at the border of a new 7-year high versus the euro today, at 1.3655, just one tenth of a cent from its highest since December 21st 2007. This is chiefly because several members of the Bank of England’s Monetary Policy Committee (MPC) have hinted that UK interest rates may rise quicker than financial markets currently expect. Sterling also rose today, because UK mortgage approvals jumped for the first time since June last month, according to the British Bankers’ Association (BBA.)

Sterling is rising versus the euro today, first because the minutes of the MPC’s interest rate meeting this month showed that two members of the nine-person committee thought that the decision whether to hike UK interest rates was “finely balanced.” This indicates that the BoE is moving closer toward hiking UK interest rates, which would in turn make British investments more profitable, and so lift the pound.

Moreover, MPC member Martin Weale said in written testimony to Parliament’s Treasury Committee yesterday that it may be “appropriate to raise bank rate rather earlier than financial markets currently anticipate.” This reflects recent comments by MPC member Kristin Forbes that UK interest rate hikes may be needed “in the near future,” and so therefore adds to expectations that the Bank of England will increase borrowing costs sooner rather than later. Hence, the pound’s momentum.

Meanwhile, sterling also holds an advantage over the common currency, because UK mortgage approvals rose +36,400 last month, according to the BBA, +200 more than forecast, and the first increase since June 2013. This indicates that there’s still momentum behind the UK’s housing market, which will contribute to Britain’s economic growth.

Pound continues to hit new 7-year highs, as Eurozone deflation deepens

It's the best time to exchange pounds for euros since December 21st 2007 today.

by David Pewes

The pound to euro exchange rate has reached 1.3664 this morning, a new 7-year high, sterling’s strongest since December 21st 2007. This is largely because the Eurozone continued to fall further into deflation in January, while a second estimate of German growth figures for Q4 failed to rise, disappointing some investors.

Sterling continues to climb versus the euro, because Eurozone inflation fell –0.6% in January compared to last year, according to official statistics body Eurostat today. This confirms that the price of goods and services in the currency bloc continues to fall, thereby risking outright deflation, widely associated with economic stagnation. Hence, the weak euro.

In addition, the pound has hit this new 7-year high versus the euro, because a second estimate of German economic growth, released today by Statistisches Bundesamt Deutschland, confirmed that Germany grew +0.7% in the last three months of 2014. This disappointed some investors, who’d hoped that Germany’s growth would be revised up. This has also weakened the euro today, to sterling’s advantage.

Pound a quarter cent below 7-year high, as German IFO disappoints

Sterling has hit 1.3605 today, right next to its strongest versus the euro in 7 years.

by Sam Hewitt

The UK pound is gravitating towards a new 7-year high versus the euro today, having climbed +0.58% to reached 1.3605, just a quarter cent below its strongest since December 21st 2007. This is chiefly because February’s assessment of the Germany economy, released today by economic analysts IFO, disappointed financial investors.

Sterling is climbing today, because IFO’s assessment of Germany’s business climate, current assessment, and expectations all came in beneath forecasts this morning. In particular, IFO noted that German firms are worried about the political instability in Greece and Ukraine, given that Germany is an export-oriented economy. To make its assessments, IFO speaks to 7,000 German businesses each month. This thereby weakened the euro, because it suggests that Germany, the Eurozone’s largest economy, may not expand as strongly as previously thought in the near future.

Pound to euro exchange rate hits new 7-year high, most since Dec 2007

Sterling has hit its highest versus the euro since Dec 21st 2007 today, at 1.3619

by Peter Lavelle

The UK pound continues to hit new record highs against the euro today, touching 1.3619, its strongest since Decembr 21st 2007, or 7 years and 2 months. Sterling is rising, because UK retail sales continued to grow strongly in December, while the UK government achieved its biggest surplus since 2008 last month. Meanwhile, Germany’s crucial manufacturing sector neared stagnation for the second consecutive month in February, weakening the euro.

Sterling is flying, because UK retail sales rose +5.4% in January compared to the same time last year, according to figures released today by the Office for National Statistics. This was –0.5% less than forecast, yet nonetheless signals that British consumers feel comfortable shelling out, lifting both the UK economy and sterling.

Moreover, the pound is also climbing today, because the UK government achieved a budget surplus of £8.8 billion in January, the most since the start of the financial crisis in 2008. In total, this means the Coalition has borrowed £74 billion so far this financial year, -£6 million less than this time in 2014, and is thus succeeding in reducing the UK’s deficit. This also boosted the pound.

Meanwhile, the euro is on the back foot today, because Germany’s vast manufacturing bloc almost stagnated for the second consecutive month in February, according to economists Markit. German factories expanded just 50.9 this month, well below the 51.5 forecast, and dangerously close to the 50.0 that divides growth from contraction. This therefore brought down the euro today.

Pound to euro exchange rate steady at 1.3540, close to 7-year high

At 1.3450, the pound is less than a cent from its recent 7-year high.

by Jane Fisher

The pound is holding around 1.3540 versus the euro today, less than a cent below its strongest in a full 7 years, or since December 21st 2007. Sterling isn’t moving much because, while UK manufacturers grew more optimistic in February, Greece looks to have reached a deal to remain in the Eurozone, leaving sterling and the euro at even-stevens.

Sterling has received a lift today, because the mood among UK manufacturers climbed to +10 this month, according to the Confederation of British Industry, ahead of forecasts for +6. This suggests that British factories feel that economic conditions are set to improve in the immediate future, and hence bodes well for the UK economy, lifting sterling.

However, the euro has also strengthened today, because the deadlock between Greece and the Eurozone has at last been broken, as Greece has agreed to seek a 6-month extension to pay back its loans. Greece hopes to use these 6 months to renegotiate the terms of its bailout, but in the meantime, the threat of Greece exiting the euro has now lessened, thereby lifting the common currency.

Pound touches new 7-year high versus euro, as UK joblessness falls

by Jack Smith

The pound has surged to 1.3577 versus the euro today, a new 7-year high, its strongest since December 21st 2008. Sterling has climbed, chiefly because UK wages rose more than forecast in January, while British unemployment unexpectedly fell to its least since 2008, at just 5.7%.

Sterling has climbed, first because UK wages including bonuses rose +2.1% last month, according to the Office for National Statistics, well ahead of the +1.7% forecast. This lifted the pound because, given that UK inflation fell to an all-time low of just 0.3% last month, British consumers’ spending power will now increase, fuelling Britain’s economic comeback.

Moreover, the pound also jumped, because UK unemployment surprisingly fell to a new 6-year low of just 5.7% in the 3-months to December, according to the ONS, exceeding forecasts it would remain stable at 5.8%. This boosted sterling, because there were -97,000 fewer jobless people in the UK between October, bringing the jobless total down to just 1.86m, and so brightening the UK’s economic outlook.

Pound drops –0.75% versus euro, as UK inflation hits all-time low

by Brian Miller

Sterling has fallen –0.75% versus the euro today to as low as 1.3435, and is now more than a cent below its recent 7-year high. The pound has lost out, chiefly because UK inflation hits its lowest since records began in 1989 last month, while German investors have grown unexpectedly upbeat about the current financial outlook.

The pound has declined today, because UK inflation fell to just 0.3% in January, according to the Office for National Statistics, –0.2% lower than the month before, and the lowest since records began in 1989. This weakened sterling, because with inflation low, it greatly cuts the odds that the Bank of England will hike UK interest rates in the foreseeable future.

Moreover, looking forward, sterling may continue to lose out, because UK inflation is expected to drop further in coming months. For instance, Capital Economics analyst Paul Hollingsworth said today that “We think that a brief period of deflation is imminent,” as UK energy companies factor in the recent dip in oil prices, as well as falling food costs.

Meanwhile, sterling also finds itself on the back foot versus the common currency today, because German investors grew unexpectedly upbeat about the current financial outlook this month, according to economics body ZEW. ZEW’s current situation figure hit 45.5 this month, well ahead of the 30.0 forecast, indicating that German investors think the immediate future is bright. This is the fourth consecutive month that the ZEW index has risen, and so could weigh on sterling versus the euro.

Pound falls -0.4% versus the euro, as Eurozone trade surplus rockets

by David Pewes

UK sterling has fallen -0.4% to 1.3472 versus the euro today, although it still remains just a cent from its highest against the common currency in 7 years, or since December 21st 2008.

The pound has fallen, chiefly because the Eurozone recorded an unexpectedly large trade surplus in December. The trade surplus of the 19-nation currency bloc hit +€23.4bn in the last month of 2014, according to official statistics body Eurostat. This was +€3.8bn more than forecast, the fifth consecutive monthly rise, and the Eurozone's largest trade surplus on record.

The Eurozone trade's surplus rose, chiefly because exports jumped +8.0% in December compared to 12 months before, while imports rose just +1.0%. This suggests that Eurozone firms are benefiting greatly from the low value of the euro, and so selling more good abroad. This thereby lifted the euro because, in spite of the Eurozone's current weakness, it nonetheless bodes well for the currency bloc's economic future.

Pound steady at 1.3485 versus euro, although Europe grows faster

by Sam Hewitt

Sterling has held its ground versus the euro today, standing close to 1.3485 throughout the day, just half a cent from its highest in 7 years, or since December 21st 2008. This is in spite of the fact that the Eurozone economy, and Germany’s especially, expanded more than expected in the last three months of 2014.

The pound has held firm versus the euro today, although the common currency bloc grew +0.3% in Q4, says official statistics body Eurostat, more than the +0.2% forecast. In particular, Germany’s economic growth exceeded even the most optimistic forecasts, hitting +0.7% between October and December. According to UniCredit Chief Economist Andreas Rees, this may reflect “consumers spending more because of lower energy costs, record-high employment and rising wages.”

Sterling hasn’t weakened versus the euro today however, in spite of this upbeat economic news from the continent. This may reflect the continuing uncertainty about Greece’s future in the eurozone, overshadowing the Eurozone’s unexpected economic momentum. Right now for instance, just two weeks remain before Greece must receive a €7bn bailout tranche, without which it will go bankrupt, and will almost certainly be forced out of the Eurozone. With this worry, it’s hence no surprise that sterling retains the upper hand versus the euro.

Pound hits new 7-year high versus euro, as Carney points to rate hikes

by Peter Lavelle

The UK pound has hit 1.3559 versus the euro today, its highest since December 21st 2008, or more than 7 years.

Sterling has climbed, chiefly because governor of the Bank of England Mark Carney has presented an upbeat view of the UK’s economic outlook at today’s Inflation Report, even going so far as to suggest that the central bank may hike interest rates sooner than currently forecast.

Mr. Carney said today that the sharp drop in oil prices in recent weeks would significantly boost consumer spending in the UK, insofar that cheaper oil gives people more spending money. Given this, the central bank upgraded its prediction for UK economic growth in 2016 by +0.3%, to 2.9%.

Moreover, the Bank of England’s governor added that if the UK’s economy continues to recover strongly, “it would be appropriate for Bank Rate to increase more quickly than embodied in current market yields.” This raises the prospect of higher UK interest rates sooner, thereby boosting sterling.

Best time to exchange pounds for euros since Dec 28th 2007, 7 years

by Jane Fisher

UK sterling has touched its strongest versus the euro since December 28th 2007 today, or more than 7 years, at a peak of 1.3536.

The pound has risen, chiefly because it remains to be seen whether Greece will still be part of the Eurozone at the end of this month. Today for instance, both Greek prime minister Alexis Tsipras and finance minister Yanis Varoufaki released statements rejecting the term’s of Greece’s bailout, putting Athens on a collision course with the rest of Europe.

Mr. Tspiras for example told the Greek parliament today that “We are not negotiating the bailout; it was cancelled by its own failure.” This followed a confidence vote in Mr. Tspiras’s government, in which 162 of 300 Greek MPs voted to continue supporting his anti-austerity platform.

Meanwhile, Greece’s treasurer Mr. Varoufaki has insisted that “Greece's debt cannot be paid off in the near future.” This statement comes ahead of a meeting between Mr. Varoufaki and other Eurozone finance ministers this week, to discuss Greece’s bleak financial future.

With this in mind, the pound has exceeded its 7-year high versus the euro!

Sterling jumps close to 7-year high, as UK growth accelerates

by Jack Smith

British pound sterling has strengthened +0.46% versus the euro today to reach a peak of 1.3495, less than a tenth of a cent from its highest in 7 years, or since January 25th 2008.

Sterling has risen, chiefly because the UK economy unexpectedly accelerated in the 3 months to January, according to economic group NIESR (National Institute for Economic and Social Research.) Britain’s economy expanded +0.7% between November and January, +0.2% faster than in the last three months of last year. Moreover, NIESR now forecasts that the UK will expand +2.9% this year, +0.3% faster than 2014. This suggests that, far from the UK economy winding down, it’s in fact gearing up in 2015. This thereby lifted the pound.

Elsewhere, the pound also rose today, because the UK’s manufacturing sector grew +2.7% in December compared to 12 months ago, according to figures from the ONS (Office for National Statistics) today, the most since 2010. This further adds to the upbeat atmosphere about the UK’s economy this year.

Lastly, the euro has weakened today, because German Chancellor Angela Merkel has rejected the possibility of changing Greece’s bailout conditions. Speaking at a press conference, Mrs. Merkel said that the existing bailout must be “the basis of any discussions that we have”. Given that Greek prime minister Alexis Tsipras was elected with a mandate to end the bailout, this hardens the divisions between Athens and Berlin, boosting the risk that Greece may eventually leave the Eurozone.

Sterling close to 7-year high versus euro, as threat of Grexit looms

by Brian Miller

UK sterling stands almost unchanged versus the euro today at 1.3475, just a quarter of a cent from its strongest since January 25th 2008, or 7 full years.

The pound remains close to this 7-year high, because several politicians released statements over the weekend highlighting and even increasing the risk that Greece may soon exit the Eurozone.

Euro weakens, as Tsipras rejects bailout

For instance, Greek prime minister Alexis Tsipras, in his first major speech in Greece’s parliament, rejected the austerity policies imposed on Greece during the past few years. Mr. Tsipras said that "After five years of bailout barbarity, our people cannot take any more,” and refused to extend Greece’s €240 bailout, due to expire on February 28th.

Euro declines, as Juncker challenges Greece

Meanwhile, the president of the European Commission Jean-Claude Juncker has said that Greece cannot expect that the rest of Europe will simply accept whatever conditions it proposes. Mr. Juncker told journalists that "Greece should not assume that the overall mood has so changed that the euro zone will adopt Tsipras's government program unconditionally."

Clearly then, this puts Athens and Brussels on a collision course. Neither side seems prepared to compromise, increasing the risk that Greece will eventually exit the Eurozone.

Euro falls, as Greenspan predicts Grexit

What’s more, globally-respected economist and former head of the US Federal Reserve Alan Greenspan gave his two cents over the weekend, arguing that Greece’s exit from the Eurozone is inevitable. Mr. Greenspan said that "Greece will leave the Eurozone. I don't see that it helps Greece to be in the Euro, and I certainly don't see that it helps the rest of the Eurozone.”

With this in mind, the pound remains close to its 7-year high versus the euro today.

Pound slides -0.5% against euro toward 1.33, as Eurozone rebounds

by Sam Hewitt

British sterling has slid -0.5% against the euro to a low of 1.3311 today, as the Eurozone's economic climate has unexpectedly improved, according to the most recent data.

Pound slides, as German factory orders rebound

Sterling has lost out for instance, because German factory orders rocketed +4.2% in December, according to the official Deutsche Bundesbank, easily outdoing the +1.5% forecast. This suggests that the Eurozone's largest economy has shrugged off its recent downturn, is set to perform well in early 2015.

Sterling drops, as Eurozone retail sales near 8-year high

What's more, the pound also fell, as retail sales in the Eurozone climbed at the fastest annual pace since March 2007 at the end of last year, by +2.7%, says the European Commission. This indicates that consumers in the currency bloc have more money to spend since the recent dramatic fall in oil prices, and will contribute positively the Eurozone's growth.

Eurozone economic activity grows at fastest clip in 6 months

In addition, economic activity in the Eurozone's services, manufacturing and construction sectors rose at the quickest pace since in 6 months, according to economic surveyor's Markit. Activity in the 19-member bloc reached 52.6 in January, says Markit's PMI (Purchasing Manager's Index), where any figure above 50.0 points to growth, and the higher the better.

Pound weakens, as EC upgrades Eurozone growth outlook

To top it all off, sterling also dived today, because the European Commission has upgraded its 2015 growth outlook for the Eurozone, just 3 months after it previously downgraded it. Now, the EC thinks the common currency bloc will expand +1.3% this year, +0.2% more than previously thought. According to Pierre Moscovici, the EU’s economic chief, low oil prices and a declining euro are "a welcome shot in the arm" for Europe's economy.

Pound exceeds 1.33 versus euro, as UK services surge in January

by Dave Pewes

The UK pound has jumped +0.8% to exceed 1.33 versus the euro today, hitting an intra-day peak of 1.3318, as the UK's enormous services sector unexpectedly accelerated in January.

Sterling strengthens, as UK services rebound

UK services activity surged to 57.2 last month, according to economic statisticians Markit, faster than the most upbeat economic forecast, and more than compensating for December's decline to a 17-month low. According to Markit's index, any number above 50.0 points to economic growth, with the higher the better.

UK off to "reassuringly robust start" to 2015

This boosted sterling versus the euro, because, according to Markit economist Chris Williamson, the data points to "a reassuringly robust start to the year for the UK economy. The data will allay fears that the economy is slowing sharply, having merely seen growth cool during the winter to a more sustainable pace."

Services employment sub-index 2nd best in 19 years

In particular, sterling jumped, as the UK's services employment sub-index rocketed to 57.1 in January, the joint-second highest figure since date began to be compiled, 19 years ago. This bodes especially well for the UK's job market in 2015, and may point further gains both for Britain's economy, and the pound, in the months to come.

Sterling slides -0.33% versus euro to 1.32, weakest since January 21st

by Peter Lavelle

Sterling has continued its week-long side versus the euro today, dropping -0.33% to just 1.32, its weakest since January 21st, or a fortnight.

The pound as weakened, in spite of the fact that UK construction activity unexpectedly accelerated in January, while producer prices in the Eurozone fell further.

Sterling drops, in spite of UK construction pick-up

The pound to euro exchange rate has dropped to 1.32 today, although Britain's construction sector rose to 59.1 last month, according to Markit's closely-watched measure of economic activity. This 59.1 was above all forecasts, and signals that UK construction may be picking up in early 2015. According to Markit's measure, any number above 50.0 points to expansion, and the higher the better.

In particular, UK construction firms may be buoyed by the fact that new orders rose at the fastest pace in three months in January, while industry optimism also rose for the first time since October. Tim Moore, senior economist at Markit, noted that "In short, the peak speed of the construction recovery seems to be over, but reports of its death have been greatly exaggerated."

However, sterling weakened versus the euro today, in spite of this good news. This may be because construction accounts for just 6% of UK economic activity, and so is unlikely to widely boost the overall economy.

Euro rises, in spite of falling producer prices

Moreover, sterling also lost out versus the euro today, in spite of the fact that industrial producer prices fell -1.0% in the Eurozone in December. This signals that industrial firms on the continent paid less to produce their goods over Christmas 2014, and so will contribute to deflation in the currency bloc. Given this, it's also surprising that sterling has lost out versus the euro.

Pound weakens to 10-day low versus euro, as UK factories cut prices

by Jane Fisher

UK sterling has fallen -0.86% versus the euro today to its weakest in 10 days, or since January 23rd, at 1.3216.

The pound has declined, both because UK factories cut their prices at the fastest pace since 2009 last month, raising the chances of deflation in Britain, and because investors are betting that Greece will ultimately stay in the Eurozone.

Pound weakens, as UK factories drive deflation

Sterling has lost out versus the euro today, first because UK factories cut their prices -0.9% in January, the fastest pace since September 2009, according to official figures from the Office for National Statistics today.

This weakened the pound, because it's likely to further drive down the rate of inflation in the UK, which in December hit a multi-year low of just 0.5%. In turn, this puts less pressure on the Bank of England to hike interest rates above their current record low of just 0.5%, which will thus limit the profitability of investing in the UK, and so cut demand for the pound. Hence, sterling's weakness today.

Moreover, the pound also fell today, because in January the UK's factory sector failed to grow at a pace that will meaningfully add to economic growth. UK factory expansion hit 53.0 last month according to Markit, above the 50.0 that divides expansion from contraction, yet too slow to drive the British economy. Markit economist Rob Dobson for instance notes that "At this rate, the sector will provide little meaningful boost to the economy in the first quarter."

Euro rises, as Greek government assures will stay in euro

What's more, the euro has strengthened today, because Greece's new government has sought to assure investors and the international community that it intends to stay in the Eurozone. This weekend, Greek prime minister Alexis Tsipras told journalists that "I am absolutely confident that we will soon manage to reach a mutually beneficial agreement, both for Greece and for Europe as a whole."

This strengthened the euro, because it assures investors that Greece's priority is to remain in the common currency bloc, and that fears of an accidental "Grexit" are overblown.

Sterling jumps versus euro, as Merkel unlikely to forgive Greek debt

by Jack Smith

Sterling has strengthened +0.22% versus the euro today to hit 1.3330, less than two cents from its highest in more than seven years, or since January 25th 2008.

The pound has climbed, because German chancellor Angela Merkel has signalled her opposition to cutting Greece's debt, putting her on a collision course with Athen's recently elected government. Speaking today, Mrs. Merkel told journalists that "I don't see a further debt haircut for Greece," which currently has a public debt of €320 billion, or roughly +175% of GDP.

This conflicts with the approach of Greece's freshly formed government, led by extreme left-wing party Syriza, which aims to reduce Greece's debt without the Hellenic nation leaving the Eurozone. For instance, Greek finance minister Yanis Varoufakis said today that "We are not prepared to carry on pretending and extending, trying to enforce an unenforceable programme which for five years now has steadfastly refused to produce any tangible benefits."

Hence, this lifted the pound, because it suggests that Mrs. Merkel has taken a hard-line approach to Greece's debt, that will be difficult to reconcile with the hopes of Athen's new government. If a compromise is unable to be found, this lifts the odds that Greece may eventually leave the currency bloc.

Pound steady at 1.33 versus euro, as Eurozone unemployment falls

by Brian Miller

The pound has held close to 1.33 versus the euro today, close to a 1-week low, yet still just 2 cents from its highest since January 25th 2008. Sterling has stood firm, because of mixed economic news from the Eurozone today.

Euro supported, as Eurozone joblessness falls

On the plus side, Eurozone joblessness unexpectedly fell -0.1% to 11.4% in December, according to official statistics agency Eurostat. This is the least since August 2012, and suggests that the currency bloc's job market is slowly but surely gaining traction. 157,000 fewer people were unemployed last month. This therefore lifted the euro.

Euro weakens, as Eurozone deflation deepens

Yet on the negative side, prices slid -0.6% on the continent in December, indicating that the Eurozone continues to slide further into deflation. This -0.6% equals the sharpest drop in the currency bloc's history, back in July 2009, when the Eurozone was reeling from the financial crisis. This suggests that Europe may yet succumb to a prolonged period of falling prices and economic stagnation, weakening the euro.

Pound falls almost -1.0% versus euro, on bets Greece will stay in euro

by David Pewes

The pound sterling has fallen -0.92% versus the euro today to 1.3292, its weakest since January 23rd, or 6 days. However, sterling still remains just 2 cents below its highest in 7 years against the common currency, or since January 25th 2008.

Sterling has fallen, because the financial markets are increasingly betting that Greece will stay in the Eurozone, in spite of last Sunday's election of extreme left-wing party Syriza to Greece's government. This has weakened the pound versus the euro, as international investors return assets to the common currency bloc.

International financial markets think that Greece won't leave the euro, chiefly because of the potentially disastrous consequences to Greece's economy. For instance, were Greece to revive the drachma, its currency before the euro, it would immediately plummet in value. This would spur hyperinflation across Greece, both wiping out people's savings, and make everyday goods and services far less affordable.

Moreover, were Greece to exit the Eurozone, Greece's banks would no longer have access to emergency funding from the European Central Bank. Greek banks currently owe some €44 billion to the ECB, suggesting that, were Greece to go it alone, its banks would go out of business, and there'd be a bank run, as people rushed to get their money out.

Lastly, sterling has also fallen versus the euro today, because 75.0% of Greeks want to stay in the euro, according to a recent Bloomberg poll. This greatly reduces the odds of Greece's "accidentally exiting" the common currency.

Pound slides -0.42% versus euro, as UK economy unexpectedly eases

by Sam Hewitt

UK sterling has fallen -0.42% versus the euro today, to 1.3352.

This is chiefly because the UK economy expanded at a slower pace than forecast in the last 3 months of 2014, according to official figures today. Britain's economy grew just +0.5% between October and December, says the Office for National Statistics, less than the +0.6% forecast.

This weakened sterling, because it may signal that the UK's economic comeback is now past its best. Industrial production slid -0.1% in Q4 for instance, while construction activity fell -1.8%. David Kern, chief UK economist at the British Chambers of Commerce, says that "There is no doubt that the pace of expansion is easing."

In spite of this however, the pound still stands just a cent below its highest versus the euro since February 2007. This reflects the fact that, although the UK economy eased in Q4, it still expanded the most since 2007 across the whole of last year, by +2.6%.

Sterling strengthens +0.71% to hit 1.3462 versus euro, 7-year high

by Peter Lavelle

UK sterling has continued its rise versus the euro today, strengthening +0.71% to hit 1.3462, its highest in a full 7 years, or since January 25th 2007.

The pound has risen against the common currency for a number of reasons, chiefly because of extreme left party Syriza's victory in Greece's general elections this Sunday. This boosted sterling, because it raises the odds that Greece will exit the Eurozone in the near future. Moreover, the pound is also up, as UK retail sales rose more than forecast in December, while Bank of England executive Kirstin Forbes in a suggested this weekend that the UK's central bank may lift interest rates sooner than forecast.

Pound benefits, as extremists Syriza win Greece's election

Sterling has gained, firstly because left-wing extremists Syriza convincingly won Greece's general election this Sunday, taking 149 of the 300 available seats. This boosted the pound, because although Syriza has pledged to keep Greece inside the Eurozone, Syriza strongly opposes the program of austerity cuts imposed on Greece by the Troika. Hence, Greece now finds itself on a collision course within European authorities, which may lead to what some call its "accidental exit" from the euro.

Sterling rises, as UK retail sales exceed forecasts, Forbes speaks

Moreover, the pound has also hit this fresh 7-year high versus the euro, as UK retail sales jumped +2.3% in the last 6 months of 2014, the most in 12 years, according to the UK's Office for National Statistics. This lifted sterling, because it tells us that British shoppers are continuing to fuel economic growth.

At the same time, sterling has jumped, because Kristin Forbes, member of the Bank of England's Monetary Policy Committee, has said in an interview that there may be "an earlier increase in [UK] interest rates than currently expected." This raised sterling, because higher interest rates would make investing in the UK more profitable to international investors.

Sterling touches fresh 7-year versus euro, on ECB stimulus

by Jane Fisher

The British pound has advanced +1.14% against the euro today to touch a peak of 1.3185, its highest in almost 7 years, or since February 2008. Sterling now stands almost 12 cents higher than at the start of 2014.

The pound has strengthened versus the common currency, because the European Central Bank has this afternoon announced a large program of emergency monetary stimulus, called quantitative easing. This is intended to prevent the Eurozone from entering deflation, and revive the currency bloc's economy.

Sterling climbs, as ECB announces €60bn of QE a month

Sterling is higher versus the euro today, because European Central Bank chief Mario Draghi has announced at his regular press conference in Frankfurt that the ECB will inject €60 billion a month in monetary stimulus into Europe's financial markets, up to September 2016. To inject these funds, the Eurozone's central bank will buy assets from private entities, like corporations, and public entities, such as governments.

This announcement has lifted the pound, because it exceeded the financial market's expectations for Eurozone QE; the consensus forecast was for the ECB to buy just €50bn a month in assets. This implies that the central bank will act more aggressively than previously thought to prevent Eurozone inflation falling further.

In December, prices in the Eurozone fell -0.2% compared to a year ago, the first annual decline since the financial crisis in 2008. This has spurred the European Central Bank to act to avoid the common currency bloc entering deflation, whereby prices continually fall, leading to economic stagnation, akin to Japan's "lost decade" of the 1990s.

The ECB's plan has weakened the euro, as it involves electronically printing vast quantities of money. This devalues the common currency, as there are more euros in circulation, thereby lifting other currencies like the pound by comparison.

Sterling falls to 1.2993 versus the euro, as BoE less likely to hike

by Jack Smith

The UK pound has dropped -0.91% versus the euro to 1.2993 today, its first time below 1.30 in six days, or since January 15th.

Sterling has fallen, chiefly because two members of the Bank of England's Monetary Policy Committee no longer favour hiking UK interest rates, increasing the likelihood that borrowing costs will remain at record lows of 0.5% for longer.

The pound has also lost out versus the euro, because UK wages rose -0.1% less than forecast in November, by just +1.8% year-on-year. Moreover, unemployment dropped the least in 15 months in the 3 months to November, by just -58,600.

Sterling weakens, as BoE's Weale and McCafferty vote against hike

The pound has fallen today, primarily because two members of the Bank of England's Monetary Policy Committee, Martin Weale and Ian McCafferty, have voted against hiking UK interest rates, according to the minutes of the central bank's January monthly meeting, released today.

This brought down the pound, because it's the first time since July that the 9-person MPC has voted unanimously to hold interest rates at 0.5%, where they've been since March 2009. This weakened the pound, because the prospect of lower interest rates for longer makes investing in the UK less profitable to international investors, cutting demand for sterling.

Moreover, the minutes of the Monetary Policy Committee's January meeting suggest that UK interest rates may stay low for the foreseeable future, conceivably pulling sterling further down. The MPC forecast that UK inflation will drop to 0.0% in early 2015, and that there's a "roughly equal chance" that price pressures may drop below zero.

Were UK inflation to fall below 0.0%, that would effectively eliminate the need for the Bank of England to hike interest rates to combat rising prices. This might well weaken the pound further.

Pound also under pressure, as UK wage growth disappoints

Furthermore, sterling also shed -0.91% versus the euro today, because UK wage growth rose -0.1% less than forecast in November, by just +1.8%, according to the Office for National Statistics today. This weakened the pound, because it means that people will have less money to spend than anticipated, putting a dampener on economic growth.

The pound also lost out, because UK unemployment fell the least in 15 months in the three months to December, by just -58,500, according to the ONS. This brought down sterling, because although it signals that the UK continues to create jobs, it's now doing so at its slowest pace since July to September 2013. This may signal that the UK economy is winding down.

Sterling rises +0.58% versus euro to 1.31, still close to 7-year high

by Brian Miller

The British pound sterling has jumped +0.58% versus the euro on the foreign exchange market today, to hit a peak of 1.3104. This is just half a cent from sterling's strongest since February 22nd 2008, or close to 7 years. It's also more than 10 cents higher than at the start of 2014, a little over 12 months ago.

Sterling has risen, chiefly because there is an almost universal expectation among economists and investors that the European Central Bank will unveil a program of emergency monetary stimulus this Thursday.

Pound rises, as ECB set to unveil its own version of QE

Sterling has climbed to 1.3104 today, because it's expected that the European Central Bank will reveal it's own version of "quantitative easing", a form of monetary stimulus whereby a central bank injects billions into a region's financial markets. In this case, there's a near-consensus among economists that the ECB will initiate a stimulus of €550 billion.

The ECB is forecast to do so, chiefly to ward off the possibility of deflation in the Eurozone. This is where the rate of inflation falls below 0.0%, meaning that prices begin to drop, and so people stop spending in the expectation that goods and services will continually become cheaper. Deflation is widely associated with economic stagnation, and was experienced by Japan in the 1990s during what's called its "lost decade."

However, were the European Central Bank to initiate quantitative easing, it would nonetheless weaken the euro, in spite of the fact that it's intended to revive the Eurozone's economy. This is because QE involves electronically printing billions of euros, thereby drastically devaluing the common currency, and strengthening other currencies by comparison. 

Hence, sterling has gained against the euro today, in expectation that the European Central Bank's actions this Thursday will devalue the common currency.

Pound falls from 7-year versus euro, on doubts over ECB stimulus

by David Pewes

Sterling has fallen -0.47% versus the euro from its highest in almost 7 years today, to 1.3038.

The pound has weakened against the common currency, because of fears that the European Central Bank will not launch emergency monetary stimulus this week, as is widely hoped for.

Pound weakens, as ECB may refrain from quantitative easing

Sterling has dropped today, due to concerns that the ECB will not launch an emergency scheme, called quantitative easing, to lift Europe's economy and avoid deflation, as is widely expected.

This has hurt the pound, because if the ECB doesn't launch quantitative easing, it won't inject vast sums of euros into the financial system, which would otherwise have weakened the euro.

Sterling has hence dropped, in anticipation of the European Central Bank's decision this Thursday.

Sterling climbs +0.41% versus euro to 1.3097, fresh 7-year high

by Sam Hewitt

The British pound has jumped +0.41% versus the euro today to reach 1.3097, its strongest since March 7th 2008, or 7 years.

Sterling continues to climb, because the Swiss National Bank unexpectedly ended its peg to the euro yesterday, while Eurozone inflation has been confirmed at a 6-year low.

Sterling rises, as SNB stops buying vast amounts of euros

The pound has risen, chiefly because the Swiss National Bank shockingly ended its minimum exchange rate peg of 1.20 to the euro yesterday.

This lifted sterling, because previously the SNB was buying enormous quantities of euros to prevent the Swiss franc from strengthening too much.

Hence, sterling has risen versus the euro, because one of the biggest buyers of euros in the world is no longer supporting the common currency.

"The euro can’t find a friend for love nor money," says economist Kit Juckes at Societe Generale SA, for instance.

Euro may weaken further, as Eurozone inflation confirmed at -0.2%

Moreover, sterling may exceed its 7-year high versus the euro, because it's been confirmed today that the Eurozone entered deflation in December.

Prices fell -0.2% in the common currency bloc last month, the 1st annual decline since 2009.

This boosted the pound versus the euro, because it greatly raises the odds that the European Central Bank will soon engage in emergency monetary stimulus to lift Europe's inflation rate.

"The central tendency will be for a weaker euro -- what’s to stop it?" says economist Greg Peters, Prudential Financial Inc.

Pound touches 1.3041 versus euro, 1st time above 1.30 in 7 years

by Jane Fisher

The pound has exceeded 1.30 versus the euro for the 1st time in almost 7 years today, or since March 7th 2008, to reach a peak of 1.3041.

Sterling has strengthened, because the Swiss National Bank has unexpectedly ended its minimum exchange rate peg to the euro.

Sterling flies, as SNB ends exchange rate peg

The pound to euro exchange rate has climb, because Switzerland's central bank has ended a a minimum exchange rate peg of 1.20 to the euro, that it imposed back in September 2011.

The idea behind the SNB's peg was to prevent the Swiss franc from climbing too high versus the euro during the Eurozone's debt crisis, and so protect Switzerland's export industry.

However, it now appears that the Swiss National Bank has decided it's futile to maintain the peg, after more than 3 years fighting to prevent the franc from rising.

The SNB's decision has come as a complete shock. George Buckley at Deutsch Bank for instance notes that "Market reaction has been seismic."

This lifted sterling versus the euro, because the Swiss National Bank's decisions means there's now less reason to hold euros, devaluing the common currency.

Pound hits 1.2929 versus euro, fresh record high since March 7th 2008

by Jack Smith

Sterling has touched a fresh record high versus the euro this morning, its strongest since March 7th 2008, or almost 7 years, at 1.2929.

The pound has strengthened, because the European Court of Justice has okayed a bailout scheme that allows the European Central Bank to spend trillions of euros buoying up Eurozone countries.

Sterling rises, as ECJ okays bailout plan

Sterling has hit this 7-year high, because the European Court of Justice has given its blessing to Official Monetary Transactions, an ECB scheme to help ailing Eurozone members.

With OMTs, the European Central Bank can buy the bonds of Eurozone countries, thereby cutting the overall interest rate these countries pay, allowing them to finance themselves.

The European Court of Justice called OMTs "necessary" and "in principle legitimate".

This lifted sterling versus the euro, because it hence opens the door to the ECB spending trillions of euros to boost ailing Eurozone states, in the process devaluing the currency.

Pound very close to 7-year high versus euro, as Grexit "not a bluff"

by Brian Miller

Sterling has jumped +0.55% versus the euro today to reach 1.2890, extremely close to a 7-year high, its strongest since March 7th 2008.

The pound has strengthened, both because Greece's finance minister has warned that Greece's exit from the Eurozone "could happen".

Sterling has also risen, as the European Central Bank is "in a position" to launch emergency monetary stimulus next week, says ECB executive Benoit Coeure.

Sterling rises, as Greek exit "not necessarily a bluff"

The pound has hit 1.2980 today, firstly because Greek finance minister Gikas Hardouvelis has warned that Greece's "leaving the euro area is not necessarily a bluff."

Mr. Hardouvelis signalled today that anti-euro sentiment may rise following Greece's forthcoming general election, and that "an accident may happen."

This lifted sterling, because were Greece to exit the Eurozone, it would open the door to other indebted countries such as Italy leaving, calling into question the viability of the common currency.

Pound strengthens, as ECB "in a position" to launch stimulus

Moreover, the pound has also risen, as European Central Bank executive Benoit Coeure has said that the ECB is "in a position" to launch emergency monetary stimulus next week, on January 22nd.

This boosted sterling versus the euro, because it raises the odds that the ECB will initiate quantitative easing, whereby it injects trillions of euros into the financial system.

Were the ECB to begin quantitative easing, it would lift prices in the Eurozone, thereby avoid deflation. However, it would also devalue the currency, lifting the pound against the euro.

Pound stays above 1.28 versus euro, as ECB stimulus all but inevitable

by Peter Lavelle

The pound to euro exchange rate has held above 1.28 today, climbing +0.34% to hit a peak of 1.2841.

This is because it now looks almost certain that the European Central Bank will launch emergency monetary stimulus later this month, while in the UK falling inflation may boost economic growth.

Euro declines, as ECB may initiate quantitative easing

Sterling has climbed versus the euro, chiefly because the ECB is forecast to launch drastic monetary stimulus at its next meeting on January 22nd.

This stimulus is intended to both bring the moribund Eurozone economy back to life, and reduce the threat of deflation, whereby prices continually fall.

However, were the ECB to initiate quantitative easing, it would mean injecting trillions of euros into the financial system, thereby devaluing the common currency.

Sterling could climb, as UK to experience "joyflation"

At the same time, the pound may rise against the euro, because the UK's falling rate of inflation may soon boost economic growth.

Prices in the UK are thought to have risen just +0.7% in December, the least since 2002. However, insofar as this puts less pressure on people's wallets, it may in fact benefit the UK economy.

For instance, Scott Livermore at Oxford Economics thinks that the UK will experience "good deflation" in 2015, or what he calls "joyflation."

If this benefits the UK economy, the pound may rise higher.

Pound close to 7-year high versus euro, as UK trade deficit falls

by Sam Hewitt

Sterling has strengthened +0.38% to touch 1.2838 today, its highest in 1 week, and less than a cent from its highest since March 7th 2008, or almost 7 years.

The pound to euro exchange rate has jumped, because the UK's trade deficit fell to a 17-month low in December, while UK factory output rose more than forecast.

Pound climbs, as UK trade deficit narrows

Sterling has climbed today, because the UK's deficit of goods and services with the rest of the world fell to just -£1.4 billion in December, the least since June 2013.

This lifted the pound, because it signals that the UK is coming closer to meeting the Coalition government's goal of re-orienting to an export-driven economy.

Sterling also lifts, as UK factory output beats forecasts

In addition, the pound to euro exchange rate has also risen today, because UK factory output rose +0.7% last month, the most in 7 months, and more than the +0.3% forecast.

Sterling rose as a result of this data, because it signals that the UK's economic recovery continues.

For instance, Maeve Johnston, economist at Capital Economics notes that these are "encouraging signs that the UK's recovery still had some momentum towards the end of 2014."

"As things stand, then, 2015 should be a better year for manufacturers and exporters," she added.

Pound climbs above 1.28 versus euro, as German factory orders drop

by Dave Pewes

Sterling has strengthened +0.36% versus the euro today to hit a peak of 1.2809, just 1 cent below its highest since March 2008, or almost 7 years.

The pound has climbed against the common currency, because German factory orders fell more than forecast in November.

Pound rises, as German factory orders shrink

Sterling has exceed 1.28 versus the euro today, as orders in Germany's factories declined -2.4% in November, far more than the -0.8% predicted.

This lifted the pound, because it points to continuing weakness in Europe's largest economy.

Germany expanded just +0.1% between July and September, narrowly avoiding recession.

Sterling climbs, as ECB more likely to add stimulus

Today's disappointing German data also lifted the pound, because it raises the odds that the European Central Bank will soon begin emergency economic stimulus, called quantitative easing.

The European Central Bank may initiate quantitative easing, to prevent the Eurozone from falling into economic stagnation.

For example, Andrew Balls of Pacific Investment Management says today that it's "very likely" that the ECB will begin quantitative easing, when it meets next on January 22nd.

If the ECB were to begin QE, it could lift the pound against the euro, because QE means injecting trillions of euros into the financial system, thereby devaluing the euro.

Pound may also rise, on threat of Grexit

Moreover, sterling may continue to climb versus the euro, because of the continuing threat that Greece may soon exit the Eurozone.

Greece may leave the common currency, because Syriza, an extremist left-wing party opposed to Greece's international bailouts, is leading opinion polls ahead of a forthcoming election.

Joachim Poss, the Social Democrats’ deputy finance spokesman in Germany's Bundestag, notes today for instance that "Europe can’t afford a Greek exit."

Pound jumps versus euro, as Eurozone inflation turns negative in Dec

by Jane Fisher

Sterling has jumped +0.34% versus the euro to hit a peak of 1.2794 today, just a cent below its highest in almost 7 years, or since March 7th 2008.

The pound has gained, because inflation in the Eurozone turned negative in December, for the first time since September 2009, in the aftermath of the financial crisis.

Sterling strengthens, as Eurozone deflation risk grows

Sterling has lifted versus the common currency today, because Eurozone inflation fell to -0.2% last month, below the -0.1% consensus forecast.

This boosted the pound, because it increases the risk that the common currency bloc will experience deflation, a period of continually falling prices.

Were deflation to occur, it may be negative for the Eurozone, because it's closely associated with economic stagnation, akin to what Japan experienced in the 1990s.

Pound may rise, as ECB prepares emergency stimulus

Moreover, sterling may continue to rise versus the euro, as the European Central Bank is widely tipped to announce emergency stimulus, called quantitative easing, to fight the risk of deflation.

Earlier this week for instance, ECB chief Mario Draghi told German newsletter Handelsblatt that the risk of deflation in the Eurozone "cannot be entirely excluded."

Quantitative easing would ease the risk of deflation, because it means injecting enormous sums into the Eurozone's economy, thereby devaluing the euro, and lifting prices.

However, a side effect of this is that, as more euros come into circulation, currencies like the pound rise versus the euro.