The pound halted an eight-day gain versus the euro as traders increased caution before the European Central Bank’s meeting this week and amid the fallout from the Swiss franc starting to trade freely versus the common currency.
Sterling weakened from its strongest level in almost seven years against the common currency amid speculation that details of an ECB program to buy government bonds will be announced at the Jan. 22 meeting. JPMorgan Chase & Co.’s Global FX Volatility Index climbed to the highest level since June 2013 last week after the Swiss National Bank unexpectedly removed its cap on the franc. U.K. government bonds rose.
“Short-term, there has been some profit-taking on the euro,” said Harry Adams, head of trading at Argentex LLP, a currency advisory company in London. “A lot of people are covering in the lead-up to Thursday just in case nothing is announced or if something is announced and it disappoints, then the euro will take a bit of a lift. It has been a bad week for FX traders as a whole so a lot of people are scaling back their risk.”