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Forex - Euro falls to fresh 1-1/2 year lows against sterling

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Investing.com -

Investing.com - The weaker euro fell to fresh one-and-a-half year lows against the pound on Thursday as the diverging monetary policy stance between the European Central Bank and the Bank of England pressured the single currency lower.

EUR/GBP was down 0.20% to 0.8043, the weakest level since December 2012.

The pair was likely to find support at 0.7960 and resistance at 0.8064, the session high.

The euro has weakened broadly as euro zone bonds rallied in recent sessions, widening the yield gap between euro zone sovereign bonds and their major counterparts.

The ECB cut all its main rates to record lows on Thursday and for the first time imposed negative deposit rates on commercial lenders, in a bid to stave off the risk of deflation in the euro zone.

Demand for the pound continued to be underpinned after upbeat U.K. employment data on Wednesday indicated that the economic recovery is continuing to gain momentum, bolstering expectations that the BoE will raise interest rates ahead of other central banks.

Official data showed that the U.K. unemployment rate fell to 6.6% in the three months to April, the lowest since early 2009.

A faster-than-anticipated decline in the unemployment rate earlier this year prompted the BoE to update its forward guidance, under which it originally said interest rates would remain on hold until the jobless rate fell below 7%.

Earlier in the week, BoE policymaker Ian McCafferty said the bank is moving closer to hiking rates and added that economic data over the coming months would be key in determining the exact timing of a rate increase.

Elsewhere Thursday, sterling rose to almost one-week highs against the dollar, with GBP/USD up 0.23% to 1.6826 from 1.6785 late Wednesday.

Market participants were looking ahead U.S. data on jobless claims and retail sales later in the trading day, after recent economic reports indicated that the economy is shaking off the effects of the severe winter.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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