The British pound extended its previous session’s rally in early European trading on Wednesday as Asian and European equities gained on improved outlook for future economic growth.
Tracking their Asian peers, the European equities started trading in positive territories today with U.K.’s FTSE 100 Index is currently up 0.52 percent, France’s CAC 40 is trading higher at 0.94 percent and Germany’s DAX is up 1.24 percent.
Asian stocks, barring Chinese stocks, rose between 0.6 percent and 1.7 percent today, as reports about Japanese companies resuming production, higher-than-estimated corporate profits and data showing Japan’s industrial production unexpectedly rose in February boosted sentiment.
The pound has been trading higher since yesterday’s positive data on GDP, which showed that the British economic contraction at the end of 2010 was less than estimated earlier.
The U.K. economy contracted 0.5 percent in the fourth quarter, which was revised marginally from a fall of 0.6 percent published in February, the Office for National Statistics said yesterday.
The pound touched 133.44 against the yen around 3:30 am ET, the highest level since March 11. The pound-yen pair is presently worth 133.11 with 133.70 seen as the next likely resistance level. The pair settled yesterday’s deals at 132.08.
Japan’s industrial production rose 0.4 percent in February, beating forecasts for a 0.1 percent monthly contraction following the 1.3 percent gain in January.
On an annual basis, industrial production climbed 2.8 percent -below expectations for a 4.0 percent climb following the 3.5 percent increase in the previous month.
Against the US dollar, the pound advanced to a 5-day high of 1.6056 around 3:30 am ET and the pair held steady thereafter. The pair is currently quoted at 1.6040, up from 1.6014 hit late New York Tuesday. On the upside, the British currency may target resistance around the 1.6140 level.
The pound advanced to an 8-day high of 1.4829 against the franc and a 2-day high of 0.8772 against the euro around 3:30 am ET. The pound that closed yesterday’s deals at 1.4737 against the Swiss franc and 0.8816 versus the euro is presently quoted at 1.4792 and 0.8793, respectively.
If the sterling strengthens further, it may find target levels at 1.4970 against the alpine unit and 0.8760 against the European currency.
The euro has been under pressure again on fears of renewed sovereign debt crisis after the rating agency Standard & Poor’s on Tuesday lowered its sovereign credit ratings on both Portugal and Greece.
S&P cut Portugal’s senior debt rating by one notch to BBB- from BBB. The downgrade comes after the Bank of Portugal on Tuesday cut its economic forecasts for 2011 and 2012 and said substantial measures will be needed to meet the government’s deficit-reduction goals.
Further, the rating agency lowered its long-term sovereign credit rating on the Greece by two notches to BB- from BB+ and noted that the rating remains on CreditWatch with negative implications, where it was placed on December 2, 2010.
Looking ahead, the Eurozone economic confidence and the Swiss KOF leading indicator – both for March are slated for release in the European session.
The U.S. ADP employment report for March and Canada’s industrial product price for February are due in the New York session.