LONDON, Dec 16 — The euro and sterling edged higher today ahead of Bank of England and European Central Bank monetary policy meetings, a day after the US Federal Reserve unveiled its tightening plans.
Euro and sterling rose as investors awaited the outcome of the Bank of England meeting at 1200 GMT and the European Central Bank at 1245 GMT.
Against a basket of currencies the dollar slipped 0.2 per cent to 96.165 as of 0900 GMT, after hitting a three-week high the previous day as the Fed said it will end its pandemic-era bond buying in March and pave the way for an expected three interest rate hikes in 2022.
“So the FED is waiting in the wings and I am curious to see what its European counterpart, the ECB, will say today,” said Moritz Paysen, FX trader at Berenberg.
“The market is not expecting much today and any sign that would even hint at monetary tightening would provide significant tailwind for the euro”, he said.
Euro zone business growth has slowed more than expected this month as renewed restrictions imposed to curb the Omicron coronavirus variant curtail the recovery in the bloc’s dominant services industry, a survey showed.
While no change in rates is expected in the euro zone, market pricing indicates a small rise in interest rates by the UK central bank is unlikely but not impossible.
Market expectations about whether the BoE will raise rates have swung back and forth as inflation surged to a more than 10-year high of 5.1 per cent while the UK recorded its highest daily tally of coronavirus cases since the start of the pandemic yesterday.
Sterling rose 0.2 per cent on the day versus the dollar to US$1.3295 (RM5.61), while the euro was 0.2 per cent higher versus the greenback at US$1.13150.
On a busy day for central banks, the Swiss franc was little changed versus the euro at 1.0442 after the Swiss National Bank kept its key interest rate at -0.75 per cent despite rising inflation and the franc near its highest level since July 2015.
The Norwegian crown rose 0.35 per cent versus the dollar to 8.94 after Norges Bank raised its benchmark interest rate as widely expected and said more hikes will likely follow next year despite the spread of the Omicron variant.
ING analysts said they saw “considerable upside room” for the Norwegian crown, “which is also receiving some tailwind from booming natural gas prices,” they told clients.
The Swedish crown rose 0.45 per cent versus the US dollar at 9.06 as data showed unemployment in the country fell to 7.5 per cent in November.
The Australian dollar edged 0.2 per cent up versus the greenback at US$0.7175 after strong job data. — Reuters
