Forex Pros – The euro advanced to a four-month high against the pound on Monday, boosted by an unexpected agreement to shore the euro zone’s bailout fund and expectations of a near-term interest rate hike by the European Central Bank.
EUR/GBP hit 0.8692 during European morning trade, the pair’s highest since November 8; the pair subsequently consolidated at 0.8671, gaining 0.30%.
The pair was likely to find support at 0.8588, Friday’s low and resistance at 0.8776, the high of November 5.
On Friday, European Union leaders agreed to increase the effective lending capacity of the European Financial Stability Facility to the full EUR440 billion from a level of around EUR250 billion and enable the fund to buy the bonds of distressed member states.
The agreement should ensure that the fund is capable of bailing out any euro zone states beyond Greece and Ireland that require assistance.
The single currency was also supported by expectations that the ECB could raise rates as early as next month, in contrast to the U.K., where investors have trimmed expectations for a near-term rate hike.
The euro was also up against the U.S. dollar, with EUR/USD climbing 0.48% to hit 1.3970.
Earlier in the day, official data showed that industrial production in the euro zone expanded slightly less-than-expected in January, but December’s result was revised upward to show a further rise after robust growth in October and November.
ForexPros.com
