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."
