Pound In Fresh Advance Against Euro
- Written by: Gary Howes
Above: File image. Francois Villeroy de Galhau, Governor Banque de France, Image: Deutsche Bundesbank, Nils Thies.
Pound sterling benefits as euro exchange rates recede on ECB exchange rate scrutiny.
The pound to euro exchange rate hits 1.1540 in midweek trade, extending the near-term recovery from last week's low at 1.1434.
A drop across the spectrum of euro exchange rates is underway as recent advances are reversed and as ECB policymakers express concern about the rapid appreciation of the euro.
"We are closely monitoring this appreciation of the euro and its possible consequences in terms of lower inflation,” said Francois Villeroy de Galhau on LinkedIn.
"If the euro appreciates further and further, at some stage this might create of course a certain necessity to react in terms of monetary policy," Kocher said. "But not because of the exchange rate itself, but because the exchange rate translates into less inflation, and then this is of course a monetary policy issue," said Martin Kocher, head of Austria's central bank.
The warnings echo those made by Luis de Guindos's last July when EUR/USD touched 1.20 following a rapid ascent.
The single currency's midweek pullback hints at the potential for a more cautious euro into next week's ECB interest rate decision and press conference, opening the door to further GBP/EUR gains.
Also driving the euro weakness is the recovery in the dollar following a bruising few sessions.
The dollar has sold off in spectacular fashion amidst fears that the U.S. administration is actively pursuing a weak-dollar policy. The euro has typically benefited when USD weakness is caused by policy fears and concerns over the USD's global reserve status.
But with many USD pairs oversold, the currency recoups some of its recent losses and the euro switches from being the big winner to the big loser.
