The pound posted its biggest advance in eight weeks versus the euro amid speculation the European Central Bank will add stimulus next week even as Bank of England policy makers debate raising interest rates.
Sterling ended a seven-week slide against the dollar, its longest run of declines since September 2008. The pound reached the strongest level in more than two weeks against the euro yesterday as data showed U.K. consumer confidence matched the highest since March 2005. ECB President Mario Draghi said Aug. 22 that price expectations in the euro region have declined, fueling speculation the central bank will announce new measures, including asset purchases, to stave off the threat of deflation.
“You’ve got Draghi talking about potentially delivering quantitative easing, or a variant, and of course U.K. policy is potentially going in the other direction,” said Neil Mellor, a currency strategist at Bank of New York Mellon in London. In euro-sterling “we’ve seen this big move since the beginning of the month and it really coincides with Draghi’s” comments.
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