BLBG:Euro Gains on Speculation Draghi to Signal Optimism; Pound Rises
The euro rose toward a 14-month high against the dollar amid speculation European Central Bank President Mario Draghi will signal optimism about growth rather than concern at the currency’s strength at a news conference.
The shared currency appreciated versus 13 of its 16 major counterparts as ECB policy makers meet in Frankfurt today to set policy in the 17-member region. Data over the past month have shown German investor confidence increased and sentiment in the euro-area economy improved. The pound advanced as Bank of England Governor-designate Mark Carney said the central bank must exit unconventional policy. New Zealand’s dollar fell after a government report showed employers cut jobs last quarter.
“There’s some speculative euro buying ahead of today’s ECB meeting,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “The last meeting was relatively positive on developments in euro-zone financial markets. Today he could acknowledge that the leading indicators have been pointing toward economic recovery.”
The euro advanced 0.3 percent to $1.3561 at 10:22 a.m. London time after rising to $1.3711 on Feb. 1, the strongest level since Nov. 14, 2011. The currency gained 0.5 percent to 127.27 yen after climbing to 127.71 yesterday, the highest since April 2010. The yen fell 0.2 percent to 93.85 per dollar.
The ECB will keep its benchmark rate at a record-low 0.75 percent, according to all 60 economists in a Bloomberg News survey. The decision is due at 1.45 p.m. and Draghi holds a press conference 45 minutes later.
Euro’s Gain
Europe’s shared currency has strengthened 3.1 percent this year, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar is little changed and the yen tumbled 8.4 percent.
Italian and Spanish bonds have fallen this week as Italy’s former Prime Minister Silvio Berlusconi narrowed the lead of front-runner Pier Luigi Bersani in polls before this month’s election and Spain’s Prime Minister Mariano Rajoy was called on to resign amid reports of corruption in his party.
For the euro, “we’re looking for some modest further upside in the near term but given the turnaround in sentiment we’ve seen in the Italian and Spanish debt markets heading into the Italian elections, that’s likely to damp upside potential for now,” Bank of Tokyo-Mitsubishi’s Hardman said.
The euro will probably strengthen to $1.37 during the next month, he said.
Pound Advances
The pound rose versus all its major peers after Carney said the central bank must design, implement and ultimately exit from unconventional monetary policy in a manner than reinforces public confidence. Carney, who becomes BOE Governor in July, made the comments in a written testimony to U.K. lawmakers.
The U.K. currency advanced 0.4 percent to $1.5729 and appreciated 0.2 percent to 86.18 pence per euro.
New Zealand’s dollar dropped for a second day against the U.S. currency after the statistics bureau said payrolls fell 1 percent in the final three months of 2012. The workforce participation rate declined to the lowest in eight years.
“The fall in the currency was to be expected given the drop in employment and the participation rate, but we look at these levels as a chance to buy the dips,” said Mike Jones, a currency strategist at Bank of New Zealand in Wellington.
The so-called kiwi currency fell 0.4 percent to 83.61 U.S. cents after weakening 0.7 percent yesterday.
To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
