Euro, pound climb as traders adjust rates outlook

[DUBAI] The euro strengthened to the highest level in more than a year and the British pound gained a seventh day as expectations grew that financial conditions will be tightened on accelerating economic growth. Banking stocks outperformed and oil extended its winning streak.

Even after European Central Bank officials tried to play down the hawkish aspects of a speech this week from Mario Draghi, the euro continued its advance as odds for a rate hike this year climbed. Data showing euro-area economic confidence jumped to the highest level in a decade will have bolstered the market's view. In the UK, where the central bank chief has been even more explicit, the pound is on the longest winning streak since 2015.

Banks led stock gains in Europe and Asia amid the prospect for higher rates and in the wake of Wednesday's US stress-test results, and miners jumped with commodity prices. The broader European gauge still fell, led lower by utilities and construction companies.

Still, global equities are poised for the best first half of a year since 1998, gaining 11 per cent to a record. Investors are putting their faith in the robustness of earnings as the economy continues its recovery, shrugging off a host of worries from oil's slump into a bear market to political wrangling in Washington. But risks remain: markets swung this week as the debate on normalising central bank policy intensified after nine years of stimulus.

BLOOMBERG