The pound appreciated to the strongest level in 21 months versus the euro as the European Central Bank’s pledge to keep interest rates low highlighted the divergence of its policy outlook from the Bank of England’s.
Today’s meeting, at which euro-area borrowing costs were kept unchanged at a record-low 0.15 percent, was the first since the ECB unveiled a range of stimulus measures last month to fight the threat of deflation. In contrast, Bank of England Governor Mark Carney has said the time to normalize U.K. rates is “edging closer.” The BOE will announce its latest monetary policy decision on July 10.
“The downtrend in euro-sterling remains firmly in place, reflecting building investor expectations that monetary policy will diverge between the BOE and ECB,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “The trend is still strongly higher for the pound. Economic data is consistent with very robust growth.”