Euro clears 9-month peak as ECB hawks let fly

By Wayne Cole SYDNEY (Reuters) - The euro scaled a nine-month high on the dollar on Monday as more hawkish comments on European interest rates contrasted with market

pricing for a less aggressive Federal Reserve. The euro reached as far as $1.0903, breaking the recent peak of $1.08875 and opening the way to a spike top from last April at

$1.0936. It was aided by European Central Bank (ECB) governing council member Klaas Knot, who said interest rates would rise by 50 basis points in both February and March

and continue climbing in the months after. Knot is considered a hawk among policymakers and the comment was taken as push back against recent reports that the ECB would

scale back to quarter-point moves from March. A Reuters survey of analysts also favoured a hike of 50 basis points in March and an eventual top of 3.25%. In contrast,

futures have priced out almost any chance the Fed could move by 50 basis points next month and have steadily lowered the likely peak for rates to 4.75% to 5.0%, from the current

4.25% to 4.50%. Investors also have around 50 basis points of U.S. rate cuts priced in for the second half of the year, reflecting softer data on inflation, consumer

spending and housing. Flash surveys on January manufacturing due this week are forecast to show more improvement in Europe, in part thanks to falling energy costs, than in

the United States. "The U.S. has lost its global growth leadership position if most recent PMI surveys are to be believed," said Ray Attrill, head of FX strategy at NAB.

"Meanwhile, gas prices have fallen by 60% since early December, sharply reducing the negative terms of trade shock weighing on the Eurozone/EUR."