Sterling slips against euro after European Central Bank tapering signal

Sterling slips against euro after European Central Bank tapering signal

Andrew Cummings
January 13, 2018

The euro was up 0.77 percent to $1.2037, on pace for its biggest single-day percentage gain against the greenback in about two months.

The dollar index was down 1.23 per cent for the year, its worst performance over the first nine trading days since 2010, according to Reuters data.

GBP/USD is supported in the range of 1.3455 levels and now trading at 1.3529 levels. A move beyond the 1.3700 area argues for a move towards the 1.3830 level and February 2016 pre Brexit vote lows. After fluctuating between small gains and losses in early trade, the markets turned definitively lower following the release of the minutes of the latest European Central Bank meeting.

A marked change of tone in the minutes to last month's policy meeting and the suggestion that the ECB's guidance "could be revisited" early this year raised the prospect that its quantitative easing programme could be withdrawn sooner than thought.

Reflecting on how Eurozone data will affect the exchange rate, John added: "The Eurozone's increasingly brisk growth rate, the European Central Bank is still deeply concern about inflation and the stubbornly low pace of wage rises". Data showed US producer prices fell for the first time in almost 1-1/2 years in December amid declining costs for services. Benchmark U.S. crude slipped 37 cents to $63.55 a barrel in electronic trading on the New York Mercantile Exchange. The currency touched its weakest level since December 29 at C$1.2590.

Hong Kong surged 0.9 percent, supported by flows of cash from mainland Chinese investors attracted by cheaper valuations than at home. In Hong Kong, the Hang Seng was marginally in positive territory, while in Europe, futures tracking the Euro Stoxx 50 traded 0.2% higher.

The Eurozone has recently enjoyed solid economic data, such as this morning's 2017 German GDP figure, which revealed that growth has accelerated to a six-year high of 2.2 per cent - or 2.5 per cent on a working day adjusted basis.

Confidence across world markets is booming on the back of a healthy economic outlook and optimism about corporate profits heading into the latest earnings season. The strength comes as a major relief since household spending has been a weak spot in the economy as consumers struggle with sluggish wage growth and record debt levels.

The dollar index was down by 0.5% at 91.81 as of 11:57am Shanghai time.

UK's benchmark FTSE 100 closed up by 0.2 percent, the pan-European FTSEurofirst 300 ended the day down by 0.23 percent, Germany's Dax ended down by 0.6 percent, France's CAC finished the day down by 0.3 percent.

Gold traded higher on Thursday, albeit marginally.

The Dow Jones Industrial Average rose 106.63 points, or 0.42 per cent, to 25,475.76, the S&P 500 gained 9.1 points, or 0.33 per cent, to 2,757.33 and the Nasdaq Composite added 26.87 points, or 0.38 per cent, to 7,180.44.

The ECB's warning shot also helped reverse the overnight bounce by USA government bonds after China's regulator said a Bloomberg report on Wednesday that it was considering slowing or halting its US bond purchases, was possibly "fake news".

EURUSD (1.2048): EURUSD posted a strong reversal yesterday as price action broke past the 1.20 handle convincingly.

The program was launched three years ago and since then, the ECB's portfolio of assets has ballooned to the realm of trillions of Euros.

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