Sterling unfazed by Bank of England’s unanimous vote for more QE
By William L. Watts, MarketWatch
FRANKFURT (MarketWatch) — The dollar slipped versus most major rivals Wednesday, with the euro gaining ground in choppy trading as investors debated prospects for euro-zone leaders to finalize a definitive plan to contain the region’s debt crisis at a summit meeting this weekend.
The euro EURUSD +0.31% pushed above $1.39 but recently traded at $1.3822, still up from $1.3737 late Tuesday in North American trading. The shared currency also gained by 0.6% on the Japanese yen EURJPY +0.23% to change hands at ¥106.13 and by 0.6% on the Swiss currency EURCHF +0.43% to change hands at 1.2427 francs.
Trading action has proved choppy, but the euro’s been buoyed by a report in Britain’s Guardian newspaper late Tuesday that France and Germany leaders had agreed to effectively leverage the €440 billion European Financial Stability Facility to provide €2 trillion in buying power.
However, European officials dismissed talk of a deal as premature, Dow Jones Newswires reported.
On Wednesday, Financial Times Deutschland reported that German Finance Minister Wolfgang Schaeuble told lawmakers the EFSF could be leveraged to around €1 trillion, citing unnamed parliamentary officials.
A German Finance Ministry spokesman told MarketWatch that no decision had been made on how to make the EFSF more efficient.
And analysts noted that the Guardian report offered few details, but it provided U.S. equities with a lift late in Tuesday’s session and was credited with buoying risk appetite in Asia and Europe on Wednesday.
“As we get ever closer to the Oct. 23 euro group summit, markets become ever more susceptible to risk and rumor, not least as the data backdrop ... is relatively modest, at least on the euro side of the agenda,” said Jeremy Stretch, currency strategist at CIBC in London, in a note.
The rebound in risk sentiment helped drive the euro through the top of its recent range of $1.3720 to $1.3850, he noted. The break should open the way for a test of $1.3935, but “we remain unconvinced about chasing the euro higher as the risks of being undermined by mixed political messages remains elevated,” he said.
The dollar index DXY -0.43% , which tracks the U.S. unit against a basket of six major rivals, stood at 76.708, down from 77.146.
Meanwhile, the British pound GBPUSD +0.64% bought $1.5797, up from $1.5651 on Tuesday.
Sterling initially weakened after minutes of the Bank of England’s October policy meeting showed members of the Monetary Policy Committee unanimously backed the decision to resume its dormant quantitative-easing program by authorizing the purchase of an additional £75 billion of asset purchases over the next four months.
The minutes also showed that members expect annual inflation, which hit 5.2% in September, to fall back sharply in coming months below the bank’s 2% target.
The dollar USDJPY -0.03% traded at 76.79 yen, little changed from ¥76.83.
William L. Watts is a reporter for MarketWatch in Frankfurt.
