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Pound Gains Before ECB Meeting, Though no Stimulus Expected

Sterling rose to a seven-week high against the euro on Thursday, before an European Central Bank meeting that’s expected to hold off on any new stimulus.

Versus the euro, the pound was up 0.3%, at 90.22 pence per euro, having touched its highest level since Sept. 9..

The ECB is expected to keep its policy unchanged and to resist pressure to introduce fresh stimulus, but it is likely to pave the way for action in December.

“You have the euro leg being influenced by the prospect of what is likely to be a pretty dovish set of statements from Christine Lagarde when she speaks a little later so that’s keeping euro-sterling somewhat on the defensive,” Jeremy Stretch, head of G10 FX Strategy at CIBC.

Adding pressure to the euro, French President Emmanuel Macron and German Chancellor Angela Merkel ordered their countries back into lockdown.

In the meantime, Britain’s housing minister, Robert Jenrick, said a second national lockdown in the country is not inevitable. He added that Britain will do everything it can to avoid putting the country into a new lockdown.

However, Steven Riley, a professor of infectious diseases, said that more drastic lockdown restrictions should be brought in sooner rather than later in Britain.

Against the dollar, the pound was at $1.2996, up 0.13% on the day, after falling as much as 1% on Wednesday, when risk aversion swept markets as COVID-19 cases surged. As London’s FTSE 100 shares recovered from a six-month low, the pound steadied close to the $1.30 mark.

Stretch said there is “something of similarity in terms of the patterns” of the stock market and cable, with “sterling dynamics being much more a function of risk appetite,” he said.

Source: Reuters

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