The Pound and Euro Are Recovering
The euro reached a one-week high after a hot German inflation figure boosted expectations for the European Central Bank to take more aggressive policy action.
Sterling soared to a new one-week high on Friday, helping to push the US dollar index to a one-week low as British authorities sought to erase some of the damage done by last week’s tax-cutting, debt-inflating fiscal plan.
The British pound hit $1.1222 early in the Asian session, nearly erasing all the dramatic losses that followed the new government’s so-called mini-budget last Friday. It hit a record low of $1.0317 on Monday, it was last up 0.413% at $1.11635, increasing its weekly gain to 2.872%. Sterling rose 2.13% overnight after the Bank of England staged the second day of bond purchasing to help stabilize markets, with gilt yields also climbing.
Inflation in Germany was at its highest level in more than 25 years as energy prices rose, data showed on Thursday, and analysts warned that the energy crisis had not yet fully materialized.
The result suggests that the figure for the larger 19-country eurozone coming on Friday would also likely beat economists’ expectations.
Markets have fully priced another 75 bps boost by the ECB next month, with a one-in-three chance of a full percentage point increase.
Currencies
The euro was marginally higher on Friday at $0.9822, having previously risen to 0.9834, its highest level in a week.
After recovering from a new two-decade bottom of $0.9528 on Monday, the shared currency is on course for a 1.28% weekly gain, its strongest performance in four months.
The dollar index compares the US currency to the euro, sterling, and four other major currencies. It rose 0.09% to 111.91. However, it stayed near a one-week bottom of 111.634 sets overnight.
The dollar rose 0.14% to 144.64 yen but has been primarily trading sideways below the crucial 145 level since Japanese officials intervened with their first yen purchasing intervention since 1998 last week when the dollar reached a new 24-year high of 145.90 yen.
Japan’s government will reveal the amount spent on the intervention and the amount set aside for future such actions later on Friday.
