Euro, sterling stronger in light trade

Euro, sterling stronger in light trade

Story link: Euro, sterling stronger in light trade

TAGS:

The euro and sterling both strengthened on Monday on positive data, while the US currency trade took the day off for Presidents Day.

Comments by Jean-Claude Trichet, the president of the European Central Bank to the European Parliament that expectations for interest rate tightening in the eurozone are sensible, that economic growth on the zone was on the upswing, and that risks to inflation “remain on the upside.” Mr. Trichet also warned of risks associated with housing price bubbles. Interest rates are expected to be raised one-quarter point in March, follwed by two further raises during the year to a rate of 3 percent by the end of the year.

The news out of Germany on producer prices also aided the euro higher. Producer prices were up 1.2 percent on a month-to-month basis in January, well above the predicted rise of 0.4 percent. This news was seen as supporting further interest rate rises in the eurozone. Also in Germany, December’s retail sales figures for December were revised upward to a decline of just 0.8 percent, rather than the 1.4 percent decline that had been reported earlier. Additionally, Italy reported that growth in industrial orders was up in December.

All this news combined to send the euro up 0.1 percent to $1.1942 in relation to the US dollar. The shared currency gained 0.2 percent against the Japanese yen, to ¥141.16.

In the UK, data showed housing prices up 2.7 percent in February so far, hinting that the sector might be starting to emerge from the doldrums. Also supporting this impression was news from the Council of Mortgage Lenders that showed gross lending was at £23 billion in January, the highest January numbers in history and much higher than the £17.4 billion lent last year in January. Some believe that these numbers might encourage the Bank of England not to drop interest rates too quickly in order to avoid a sharp rise in property prices.

Sterling was up 0.2 percent to $1.7449 in relation to the US dollar and it grew 0.3 percent against the yen, to ¥206.29. Meanwhile, the UK currency was unmoved against the euro at £0.6843.