Major Currency Pairs Analysis: Pound Falls To 1-Week Low Vs. Euro

European Central Bank President Mario Draghi’s pledge to keep interest rates low for an “extended period of time” is encouraging investors to seek out high-yielding assets. About $1.3 billion was placed in European junk credit funds in the week to July 17, the most in almost three months, while $239 million was pulled from high-grade funds, the fifth week of outflows, Bank of America Corp. reported on July 19. Gamenet raised 200 million euros ($264 million) from five-year senior secured bonds yielding 7.25 percent. The proceeds will be used to repay debt and for general corporate purposes, according to a statement on the company’s website.
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GBP/USD
The pound fell to a one-week low versus the euro after a government report showed economic growth matched analyst estimates last quarter, damping bets the Bank of England is moving closer to ending its accommodative policy. Sterling was little changed against the dollar as investors turned their focus to the central bank’s next policy meeting on Aug. 1 and its Inflation Report on Aug. 7. Pacific Investment Management Co. recommended investors should bet Britain’s interest rates will stay lower for longer. U.K. government bonds were little changed after 10-year yields reached the highest level in two weeks.
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USD/JPY
The yen climbed as demand for refuge increased amid ebbing risk appetite and investors cut back on wagers the currency will weaken against the dollar. There was a decent economic report out of the U.S., but people still saw weaknesses,” Brian Kim, a currency strategist at Royal Bank of Scotland Group Plc’s RBS Securities unit in Stamford, Connecticut, said in a telephone interview. “People seem to be taking a breather in terms of some of their dollar-yen long positions. They were looking for a pullback opportunity.” Long positions are bets an asset, in this case the dollar, will increase in value. The yen strengthened 0.7 percent to 98.90 per dollar.
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USD/CAD
The Canadian dollar reached its highest level in a month as the discount on Canadian heavy oil compared with the U.S. benchmark narrowed from its widest in more than two months, boosting growth prospects. The Canadian dollar has rallied since touching C$1.0609 on July 5, the weakest level in almost two years. Much of gain has been due to increased oil prices linked to temporary factors such as political turmoil in the Middle East and seasonal increases in U.S. oil demand, according to a note from Citigroup Inc. analysts led by Josh O’Byrne. The Canadian rose 0.4 percent to C$1.0280.
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