U.K.’s sterling staged a strong rally against its major rivals in early European trading on Friday as most European stocks gained and dollar weakened broadly.
European stocks edged higher today with the U.K.’s FTSE 100 index gained by 0.57%, Germany’s DAX index rose 0.35% and France’s CAC 40 index jumped 0.30%.
The pound advanced to more than a 5-week high of 1.4889 against the US dollar by 3:45 am ET and the next likely resistance level for the pair is seen at 1.55. The cable that closed yesterday’s deals at 1.4827 is presently quoted at 1.4856.
Against the yen, the pound appreciated by more than 1.2 percent to reach as high as 135.23 around 3:40 am ET from yesterday’s 3-day low of 133.56. The pound-yen pair, which closed yesterday’s deal at 134.95, is presently quoted at 134.74.
The Japanese government says it will aim for over 2% real economic growth over the next decade by encouraging investment in promising areas such as environment and health care, reducing the corporate tax rate, and by attracting more foreign investment and tourism.
Prime Minister Naoto Kan’s Cabinet approved a 113-page mid- to long-term economic growth strategy report that targets the creation of almost five million jobs in the environment, health care and tourism industries by 2020. The plan aims to lower Japan’s unemployment rate below 4% as soon as possible from the current level of about 5%.
Meanwhile, the members of the Bank of Japan’s monetary policy board reiterated that the bank will maintain extremely easy monetary policy for the time being, minutes from the bank’s May 20-21 meeting revealed today.
At the meeting, the board unanimously held the uncollateralized overnight call rate at the record low of 0.10 percent.
The pound climbed to a session’s high of 1.6532 against the Swiss franc by 4:05 am ET and the next likely target for the pair is seen around the 1.6650 level in near-term. The pound-franc pair that was worth 1.6489 at Thursday’s close is currently quoted at 1.6506.
The pound jumped to a 2-day high of 0.8335 against the euro around 3:30 am ET, up from yesterday’s new multi-week low of 0.8384. On the upside, the UK currency may find target around the 0.8210 level. The euro-pound pair that ended yesterday’s deals at 0.8359 is presently quoted at 0.8334.
Traders reacted to a joint statement issued on Thursday by the European Commission, the European Central Bank and the International Monetary Fund, saying that Greece’s economic programme to cut its budget deficit is on track and the country’s government is implementing policies as agreed.
Although the euro-zone debt worries temporarily eased after efforts made by Spain and Ireland to raise funds, traders are cautious and looking for fresh directions in the upcoming trading sessions.
In economic news, Germany’s producer prices increased for the second consecutive month in May, a report by the Federal Statistical Office showed today.
The producer price index, or PPI, rose 0.9% year-on-year in May, faster than the 0.6% growth in the previous month. Economists had expected an increase of 0.8%.
On a monthly basis, the PPI rose 0.3% in May, slower than 0.8% in April. Economists were looking for an increase of 0.1%.