GBP EUR Exchange Rate Holds Steady As Investors Nervously Await Bank of England and ECB Policy Decisions

Published: Thursday, 6 September 2012 09:00 BST - Written by John Cameron

STORY LINK GBP EUR Exchange Rate Holds Steady As Investors Nervously Await Bank of England and ECB Policy Decisions

Today’s session has the potential to be a market-moving one in the currency markets, with the Bank of England and the European Central Bank both making their monetary policy announcements for the month. The BoE leads the way at 12:00 BST; the Bank’s nine-man committee is widely expected to opt to maintain interest rates at their current record low of 0.50% for the 43rd month on the trot. However, last week’s comments from MPC member Martin Weale suggesting that a rate cut would be favourable to an extension to the £375bn currently allocated to the UK’s asset purchase programme, as a means of boosting Britain’s beleaguered economy, has elicited the potential for a major surprise. Given the relatively firm tone of this month’s leading economic indicators regarding the state of the UK’s construction, manufacturing and services sectors, an increase to QE would also provide a shock. Either scenario would cause a shift out of Sterling by institutional investors, causing the GBP EUR exchange rate to head Southwards towards the 1.2500 level once more.

However, such a downward shift for GBP EUR could prove short-lived, with the European Central Bank’s policy decision following hot on the heels of its British counterpart at 12:45 BST. The ECB is considered a much more likely candidate to trim rates; a cut to 0.50% looks on the cards from Mario Draghi’s policy committee, thanks to ongoing fears that deep austerity measures in several of the region’s states are beginning to provoke a slowdown in economic activity. Draghi’s press conference which follows the rate decision will be pored over in detail by analysts searching for hints that the ECB is set to recommence its bond-buying activities in order to prop up the fiscal positions of Spain and Italy inter alia. If such measures are suggested, then the single currency could firm in the lead-up to the weekend close.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Daily Currency Updates Euro Forecasts Euro Pound Forecasts Pound Eu Forecasts