Pound to Euro | Pound Euro Exchange Rate News and Insights

Pound euro exchange rate holds steady; markets expect an addition 50bn GBP to be printed by the Bank of England

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Category: Pound to Euro

Published on Tuesday, 07 February 2012 12:43

Written by Will Peters

The pound euro exchange rate is 0.03% higher on yesterday at 1.2052.

The pound dollar exchange rate is 0.15% lower at 1.5759.

They key risk to sterling going forward is tomorrow's Bank of England MPC (Monetary Policy Committee) meeting.

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Consensus is for the announcement of an additional 50bn GBP to be printed in order to sustain the UK economy. Anything above consensus will provide downside pressure on GBP, while anything below could provide further support.

"While we acknowledge potential risks in both directions, we retain our view that the BoE will leave interest rates on hold at 0.5% next week, and expand QE by another £50bn (to £325bn, 22% GDP) spread over a three-month period," says a morning note from BofA Merrill Lynch Global Research.

The January MPC minutes suggested some differences of opinion within the BoE on the prospects for more QE: some members judged that a further expansion was likely to be required, but others thought that the risks were more finely balanced.

"Adam Posen – the most dovish member of the MPC – recently judging that an additional £75bn of QE might be warranted, those differences in views are likely to be skewed towards favouring a smaller expansion: potentially tempering the magnitude of any further monetary policy loosening," say BofA Merrill Lynch. 

Also likely to keep the next trance of quantitative easing in check is that the BoE has noted that market capacity may restrain its ability to purchase gilts at a notably faster pace than the £5bn a week thus far during QE2.