Thursday, 28 November 2013

Euro Climbs as Inflation Data Damps ECB Speculation; Pound Rises

By David Goodman - Nov 28, 2013 5:15 AM PT

The euro rose to a four-year high against the yen as annual inflation in German accelerated in November more than economists forecast, damping bets the European Central Bank will further loosen monetary policy.
The shared currency climbed for a third day against the dollar as separate reports showed consumer-price growth in the German states of Saxony and North Rhine-Westphalia increased for the first time in five months. The ECB cut its benchmarkinterest rate this month after inflation in the currency bloc slowed to a four-year low in October. The pound rose for a third day versus the dollar as Bank of England GovernorMark Carney said the central bank will end incentives for mortgage lending.
Nov. 28 (Bloomberg) -- Bank of England Governor Mark Carney talks about financial stability and policy tools to restrain the U.K.’s house-price boom. He speaks at a news conference in London alongside Monetary Policy Committee members Paul Fisher and Jon Cunliffe, Prudential Regulation Authority Chief Executive Officer Andrew Bailey and Andy Haldane, executive director for financial stability. (Source: Bloomberg)
“‘The more resilient German inflation is, the higher the hurdle is for more easing from the ECB.’’ said Eimear Daly, a currency-market analyst at Monex Europe Ltd. inLondon. ‘‘The inflation number from Saxony significantly boosted the euro,’’ she said, referring to the first regional report to be released.
The euro climbed 0.2 percent to 139.06 yen at 1:13 p.m. London time after advancing to 139.18, the highest since June 2009. The shared currency added 0.1 percent to $1.3594. The dollar rose 0.1 percent to 102.31 yen, after touching 102.37 the strongest level since May 29.
U.S. financial markets are shut today for a public holiday.
The annual inflation rate in Germany, calculated using a harmonized European Union method, rose to 1.6 percent this month from 1.2 percent in October. The median forecast of analysts in a Bloomberg survey was for a reading of 1.3 percent.

Regional Data

Inflation in Saxony accelerated to 1.4 percent in November from 1.1 percent the previous month, the German Statistics Office of Saxony in Kamenz said today. Similar reports from the regions of Brandenburg, North Rhine Westphalia, Baden Wuerttemberg and Hesse also showed quickening price rises.
Analysts in a separate Bloomberg survey estimate European Union statistics office data tomorrow will show consumer prices in the region rose 0.8 percent in November from a year ago, after increasing 0.7 percent the prior month.
‘‘The very weak reading on CPI last time led to an ECB rate cut, so the data will be closely watched,’’ said Noriaki Murao, the New York-based managing director of the marketing group for financial markets at Bank of Tokyo-Mitsubishi UFJ Ltd. ‘‘The euro will be swayed depending on whether it will beat or trail expectations in a thin market.’’

Carney Announcement

The pound rose as Carney said allowances under the central bank’s Funding for Lending Scheme will only apply to business lending from 2014 and will no longer be available for home loans.
‘‘Sterling reacted positively to what Carney said because the perception is that the Bank of England is using macro-prudential measures to head off risk to market stability that could come from the housing market,’’ said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London.
The pound rose 0.3 percent to $1.6333 after climbing to $1.6353, the highest since Jan. 2. It gained 0.2 percent to 83.25 pence per euro after touching 83.14 pence, the strongest since Nov. 7.
The pound has risen 7.4 percent in the past six months, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar fell 2 percent and the euro appreciated 4.3 percent.
Australia’s dollar rose for the first time in seven days after data showed private capital spending jumped 3.6 percent in the third quarter from the previous period, when it rose a revised 1.6 percent. The median forecast of economists surveyed by Bloomberg was for a 1.2 percent decline.
The Aussie rose 0.4 percent to 91.19 U.S. cents, after declining to 90.65 yesterday, the weakest since Sept. 4.
Indonesia’s rupiah weakened beyond 12,000 per dollar for the first time since 2009 after a failed debt sale added to concern fund inflows are slowing on the prospect of a cut in stimulus by the Federal Reserve. The rupiah reached 12,028 per dollar, the weakest since March 2009, before closing 1.1 percent lower at 12,015 per dollar, prices from local banks show.
To contact the reporter on this story: David Goodman in London at
To contact the editor responsible for this story: Paul Dobson at