The euro continues to trade near seven month lows against the British pound after dovish policy comments from one European Central Bank member followed data showing a sharp drop in eurozone industrial output. Unemployment numbers from Greece also hit a new record high ahead of a meeting in Europe where funding for Greece still remains high on the agenda. Losses for the single currency could expand if US economic data raises hawkish monetary policy expectations and boosts the US dollar in front of next week’s all-important Federal Reserve announcement. The US dollar is already on the front foot after a Japanese newspaper reported that Lawrence Summers will be the next Fed Chairman. Summers is considered the more hawkish of the candidates to succeed Ben Bernanke. Still, the report was not enough to bring the Pound down from the fresh seven-month highs after comments from Bank of England Governor, Mark Carney, did little to stand in the way of the pound’s outperformance.
Sterling
Optimism about Britain’s economic recovery, and growing expectations that the Bank of England will have to raise interest rates sooner than it expects, helped the pound strike a fresh seven-month high against the US dollar. Sterling is also trading near similar peaks against the euro after Governor Mark Carney, speaking in Parliament on monetary policy, said little to worry investors about the BoE pushing back against market expectations. Underlying sentiment for the pound remains positive in the wake of upbeat UK jobs data on Wednesday that justified market views of an early rate increase.
US dollar
The US dollar strengthened slightly overnight after a newspaper in Japan reported that Lawrence Summers will be named as the next Chairman of the Federal Reserve. The US dollar could find further support should data on US retail sales and consumer confidence show that consumer activity, which makes up around 70 per cent of the US economy, is now strong enough for the Fed to start tapering stimulus.
Euro
The euro fell from two-week highs against the US dollar after disappointing data from the region underlined the European Central Bank’s low-rate bias. One ECB member also discussed the option of the central bank launching another liquidity operation to boost lending across the continent. The euro could face further losses if solid consumer data from the US increases hawkish US monetary policy expectations ahead of next week’s Federal Reserve announcement and strengthens the US dollar.