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.

Pound hits highest versus euro in 7 years, as Eurozone deflation looms

by Peter Lavelle

Britain's pound sterling has hit its highest versus the euro in almost 7 years today, or since May 7th 2008, at 1.2908.

This is because the President of the European Central Bank Mario Draghi has told German newspaper Handelsblatt that the possibility of deflation in the Eurozone "cannot be entirely excluded."

In a rare newspaper interview, Mr. Draghi, Europe's most powerful central banker, conceded that there's now a risk that the common currency bloc will experience a period of negative inflation, whereby prices continually fall.

Risk of economic stagnation weighs on euro

This lifted sterling versus the euro, first because deflation is widely associated with economic stagnation.

For example, Japan succumbed to deflation in the 1990s, and subsequently failed to grow its economy for years, a period referred to as its "lost decade".

Given this, if the Eurozone falls into deflation, it may also presage the currency bloc's own "lost decade".

Euro may be devalued by quantitative easing

Second, Mr. Draghi's comments also lifted the pound against the euro, because they increase the odds that the European Central Bank will launch emergency monetary stimulus, called quantitative easing, to fend off deflation.

Were the ECB to initiate quantitative easing, it would substantially strengthen the pound against the euro, because it involves injecting billions of euros into the financial system, thereby lifting the rate of inflation, but simultaneously weakening the value of the common currency.

Hence, the pound has hit this near 7-year high versus the euro, in anticipation that the European Central Bank will soon take measures that would bring down the euro.