Sterling rose to a seven-year high against the euro yesterday, as interest rate expectations moved further in favour of British assets just days before the European Central Bank embarks on a huge asset-buying spree. Data on Thursday showed firms’ investments fell at their sharpest rate in nearly six years in the last quarter of 2014, hit by lower investment in the petroleum sector as global oil prices fell. British gross domestic product grew by 0.5 percent between October and December, slowing from 0.7 percent in the third quarter. That was the slowest quarterly growth rate in a year, but was broadly in line with expectations, and much better than euro zone growth.
The euro plunged near an 11-year low against the dollar and to a fresh seven-year low against sterling late yesterday after the European Central Bank launched a bond buying plan that would increase the total monthly fund injection to €60bn. Germany opposed the decision citing this kind of a plan will allow spendthrift countries to slacken economic reforms. The ECB move further widened its divergence with the US Federal Reserve. The EUR/USD fell to 1.1183 after the announcement, down 1.6% from the previous close, and getting closer to the 26 January 11-year low of 1.1097.
The dollar was lower against the yen and the euro in Asian trade this morning, with the greenback unable to extend overnight gains triggered by strengthening hopes for higher U.S. interest rates.Currency market participants will now focus on U.S. gross domestic product data out later in the day as well as speeches by Fed vice chair Stanley Fischer and William Dudley, president of the Federal Reserve Bank of New York. Strong growth figures and bullish comments could reignite upward movement in the greenback