Euro Leaps to Three-year High, Adds 0.9%

The European Single Currency, euro was up 0.9 percent to $1.2139, on Friday, January 12, on pace for its biggest single-day percentage gain against the greenback in about two months.

On Thursday, the euro rose 0.72 percent against the dollar after ECB policymakers said in minutes of the bank’s December meeting that they could revisit their communication stance in early 2018.

Investors took that as a signal that the ECB will wind down its 2.55 trillion euro (2.27 trillion pounds) bond purchase scheme this year if Europe’s economy continues to hum along.

“The latest ECB comments were a bit on the hawkish side, so that’s giving more life to the euro,” Minh Trang, senior currency trader at Silicon Valley Bank in Santa Clara, California.

The euro found further support after Chancellor Angela Merkel struck a deal with Social Democrat (SPD) rivals on Friday to open government coalition talks, easing months of uncertainty that has undermined Germany’s global role and raised questions about her political future.

The euro’s rise weighed on the dollar index, which measures the greenback against six rival currencies. The index was down 0.59 percent at 91.313, after slipping to a four-month low of 91.243.

The index pared losses slightly after data showed underlying U.S. consumer prices recorded their largest increase in 11 months in December amid strong gains in the cost of rental accommodation and healthcare, bolstering expectations that inflation will accelerate this year.

“Everyone is waiting for some type of inflation number to materialise,” said Trang.

“But, it may be a bit premature to jump on the inflation bandwagon. I would want to see at least a quarter or two of some solid numbers,” he said.

Sterling rocketed to its highest level against the dollar since the vote to leave the European Union in mid-2016, after a report that the Netherlands and Spain were open to a softer Brexit deal for Britain.Sterling was up 0.98 percent to $1.3668.

 

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