The Euro was Steady on Thursday. How did the Sterling Fare?
The Euro remained strong on Thursday ahead of the European Central Bank announcing fresh stimulus measures. Meanwhile, sterling tumbled down after negotiators extended post-Brexit trade talks until the weekend to achieve an elusive breakthrough.
In recent weeks, ECB officials have hinted that a Pandemic Emergency Purchase Programme (PEPP), along with long-term loans for banks will form the basis of new policy measures.
Some economists expect the 1.35 trillion Euro PEPP to increase by at least 500 billion Euros. Particularly, with its duration facing a six-month extension to the end of 2022, and risks skewing towards a bigger, longer extension.
Commerzbank analyst You-Na Park-Heger stated that these adjustments wouldn’t likely have a significant effect on the common currency even if the adjustments prove to be a little more pronounced than the market expects. The analyst also added that it would take an unexpected move, for example, a rate cut to put the currency under pressure.
It would a potential surprising development if ECB President Christine Lagarde takes an unexpected “bazooka” strong stance against the recent rise of the Euro, stated Park Heger. In her view, analysts are unlikely to see more than a toothless tiger today.
The Euro edged up slightly against the dollar, increasing by 0.04% to $1.2086. However, the common currency jumped by 0.7% to 90.80 pence against the sterling. Meanwhile, the pound sustained similar losses against the greenback, tumbling down to $1.3317.
How much damage did the Sterling sustain?
The British currency plunged overnight. British Prime Minister Boris Johnson and European Commission President Ursula von der Leyen extended negotiators until the end of the weekend, trying to decide if a trade deal can be struck after failing to bridge gaps themselves. That news caused the sterling’s fall though.
Foreign Secretary Dominic Raab noted that there’s clearly some scope to keep talking. However, there are still significant points of difference that remain.
Meanwhile, Bank of England Governor Andrew Bailey announced that a no-deal Brexit would cause longer-term damage to Britain’s economy than the coronavirus pandemic. According to him, the impact of the change might be felt for decades.
On the other hand, the Australian dollar increased by 0.44% to $0.7450 on Thursday, approaching the two 1/2-year high of $0.7485 reached on Wednesday. The offshore Chinese yuan also remained below its two 1/2-year high set on Wednesday, trading at 6.5385 per dollar.
The dollar soared by 0.3% to 104.55 against the Japanese Yen. The greenback usually tends to fall when risk appetite is strong. But, it held firm overall on Thursday while trading flat against a basket of major currencies.
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