The Pound Euro Exchange Rate (GBP/EUR) Breaks Through 1.1700 On Bank of England Minutes

Modified: Thursday, 15 August 2013 10:05 BST - Written by David Woodsmith

STORY LINK The Pound Euro Exchange Rate (GBP/EUR) Breaks Through 1.1700 On Bank of England Minutes

Yesterday afternoon’s session saw the Pound well supported, sending GBP EUR up through the 1.1700 threshold. The move in favour of the Pound was triggered by a positive response from investors to the Bank of England’s latest minutes.

The Pound Euro exchange rate is currently trading up 0.25% at 1.17272 GBP/EUR. The Euro Pound exchange rate is currently trading at 0.85279 EUR/GBP.

Yesterday morning’s Bank of England minutes, in combination with July’s UK unemployment data which came out as per expectations, sent the Pound soaring against the other majors during the latter part of yesterday’s European trading day. By the time UK equities markets closed at 1630hrs, the Pound euro exchange rate (currency : GBP EUR) had traded up to 1.1720, having loitered down in the low 1.1600s for much of the day. Meanwhile, the Sterling Dollar exchange rate (currency : GBP USD) had broken through the 1.5500 level, having gained a healthy 0.59% on the day.

Market participants reacted positively to the news that the Bank of England’s nine-man committee had voted almost unanimously in favour of new BoE Governor Mark Carney’s controversial ‘Forward Guidance’ policy which will see UK interest rates remain at their record low level at least until the overall level of UK unemployment falls below the 7.0% threshold. The lone dissenter amongst the nine wise men of the Bank of England’s monetary policy committee was Martin Weale, who voted ‘no’ to the plan because he felt that the 18-24 month window for the plan to be ditched within should UK CPI inflation rise above 2.5% was ‘too long’.

The latest UK unemployment figures were published at the same time as the BoE minutes and they showed that the overall rate of joblessness in the British economy remained at 7.8% in the three months leading up to June. With some 750,000 new jobs needing to be added to the UK payroll before the Bank will countenance an increase to domestic interest rates, ‘easy money’ looks set to continue for some time in the UK. The markets came out in favour of the Bank’s drive for jobs and growth and its pragmatic stance on inflation control and the Pound climbed across the board as a result. With little in the way of significant eurozone data releases today, the existing forward momentum for GBP EUR could be set to continue. If this proves to be the case, then the next upside target for the pair comes at its 2013 high just above the 1.1900 level.

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