Pound Climbs as Draghi Spurs Risk Appetite

The Great Britain pound surged today against the US dollar and the Japanese yen after European Central Bank President Mario Draghi said that the Bank would take steps to support the currency. The sterling even managed to gain on the euro.

Draghi said today:

Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. Believe me, it will be enough.

The comment led to speculations whether the ECB would turn to direct buying of bond or prefer indirect methods, like giving the European Stability Mechanism a banking license as was proposed by Ewald Nowotny, a member of the ECB governing council. The yield on the Spanish 10-year bonds fell below 7 percent.

The environment in the United Kingdom itself is much less favorable to the pound. The economy of the Great Britain is in recession and most economists expect the Bank of England to expand the easing program on its next policy meeting.

GBP/USD rose from 1.5495 to 1.5686 and GBP/JPY soared from 121.05 to 122.65 as of 20:03 GMT today. EUR/GBP was down from 0.7838 to 0.7827.

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