British Pound Sterling | Currency News Views and Outlook

Pound euro exchange rate: GBPEUR advances as markets appear to have discounted QE in February

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Category: British Pound Sterling

Published on Wednesday, 25 January 2012 15:27

Written by Will Peters

Looking at the euro we see the currency has been heading lower, this despite a good German IFO reading.

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The pound to euro exchange rate is 0.36% higher at 1.203.

The pound to euro exchange rate has made its way back above the 1.2 level thus confirming how stable this exchange rate has become for the pair.

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The British pound took a dip lower vs the US dollar ahead of the below consensus UK GDP print, but has since traded choppily as the market digests the BoE’s current line of thinking.

Among the MPC there seems to be general agreement that some near term risks to the economy have subsided, however they still acknowledge that asset purchases are ‘likely’.

"The statement, while fairly non-committal, has potentially tamed expectations for the size of additional asset purchases in February and is lending support to the GBP. That said, worries of an external shock could flare up quite quickly if Greek talks continue to falter," says Shaun Osborne at TD Securities.

Most analysts agree that further quantitative easing will have to happen, the question is whether the bank will jump in and make a commitment in February or delay it further.

Looking at the euro we see the currency has been heading lower, this despite a good German IFO reading.

German IFO for January followed the lead of the PMIs and ZEW with a better than forecast print at 108.3 (TD: 108.5 mkt: 107.6 prior: 107.2), but upside was already expected after the PMIs yesterday, hence the lack of positive movement from the currency.