Euro Holds Gains before Ministers Meet | IFCM
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Euro Holds Gains before Ministers Meet - 9.2.2012

US Dollar The dollar remains under pressure, according to the currency’s index, which measures its performance against a set of six currencies of the major US trading partners. The index slid in Asian trading hours to the lowest level since December 8 – 78.40 – as investors boosted demand for higher-yielding currencies amid Greed debt deal progress. Euro The euro on the contrary found support in Asian trading hours, climbing to its highest level since December 12 versus the US counterpart – 1.3314. Early in the morning the Greece’s Prime Minister Office said in a statement that the leaders of the major political parties “agreed on all the points of the program [required by the creditors] with the exception of one which requires further elaboration and discussion.” The only issue remaining on the table is pension cuts. Today European finance ministers will meet in Brussels, probably with the aim to continue discussions about the second bailout package for Greece equal to 130 billion euros. At the same time the European Central Bank decides today on monetary policy. The Bank will probably leave the main refinancing operations rate unchanged at 1%. The euro fell slightly below 1.33 against the greenback at the beginning of the European trading session. British Pound The pound dived yesterday against the dollar amid concerns the Bank of England may increase its asset purchase target today by 50 billion pounds, keeping rates unchanged at 0.5%. According to the central bank’s projections inflation may fall below the 2% target by the end of 2012, leaving space for monetary stimulus. The pound dropped against the greenback yesterday from 12-week high 1.5930 to 1.5797 and traded close to 1.58 in Asian trading hours today. BoE Keeps Rates, Increases Asset Purchase The Bank of England decided today to maintain the official Bank Rate paid on commercial bank reserves at 0.5%. At the same time the Bank decided to increase the size of its asset purchase program by 50 billion pounds to a total of 325 billion, as analysts predicted. The Bank said in a statement that the decision was taken in conditions of slowing “underlying pace of recovery during 2011” and expectations that inflation will “fall sharply in the near term.” The announced asset purchase program may take three months to complete, according to the Monetary Policy Committee’s projections. The pound rose slightly against the greenback after the announcement from 1.5820 to 1.5880, before sliding to 1.5850 one hour later. ECB Maintains Rates Unchanged Today the European Central Bank also decided on interest rates. According to the bank’s statement, the Governing Council decided that “the interest rate on the main refinancing operations will remain unchanged at 1.00%.” Mario Draghi, the President of the ECB, is scheduled to hold a press conference at 2.30 p.m. CET today.
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