The Pound eased off its thirteen-month low against against the euro in Thursday’s US trading session. Earlier in the day the pair hit a fresh 13-month low after disappointing data for the UK services sector and after news that the Bank of England would not raise rates soon. The pound touched a six-month low versus a currency basket.
The Sterling was given a boost after ECB’s Trichet’s less hawkish speech hinted that the European Central Bank may not raise interest rates again anytime soon. This prompted traders who held long Euro positions to close and take profits, pushing down the Euro further, dropping from the psychologically key 90 pence level. The single currency plummeted 178 pips to as low as 0.8863 from the earlier session high of 0.9041.
Both the ECB and the BoE kept interest rates unchanged on Thursday, but many traders remain bullish on the Euro and expect it to regain its strength against the Pound. The key driver for the Euro’s upper hand over Sterling is that the ECB is tightening monetary policy much faster than the BoE.
Markets are not expecting a BoE rate hike until November or December, while many investors see the likelihood of another ECB rate rise in summer.