Pound Sterling to Euro Exchange Rate Forecasted More Gains as GBP to EUR Rockets on ECB Decision

June 5, 2014 - Written by John Cameron

STORY LINK Pound Sterling to Euro Exchange Rate Forecasted More Gains as GBP to EUR Rockets on ECB Decision

Pound to Euro Exchange Rate Today - The euro (currency:EUR) has taken a pummelling in the global currency markets this afternoon, sending the Pound Sterling to euro exchange rate (GBP/EUR) up to its highest level since January 2014. The pair touched off the 1.2400 level during the early part of European Central Bank President Mario Draghi’s press conference this afternoon, when he confirmed that this Bank is preparing the ground for a eurozone version of Quantitative Easing.

The killer blow for the single currency came when Draghi confirmed that the ECB will be instigating a €400bn LTRO (Long Term Re-financing Operation) which will flood the region’s flagging economy with easy money in an attempt to get them lending to individuals and businesses in meaningful volumes. If they do so, then the spectre of deflation which currently looms large over the euro-land is likely to recede.

Euro exchange rate was already weakened before the ECB policy decison

The Euro (EUR) was already under the cosh following the ECB’s announcement at 1245hrs BST that it would be cutting its key lending rate from 0.25% down to a fresh record low of 0.15%. The move was widely-expected, with most analysts trailing an even greater cut down to 0.10% for the eurozone’s headline interest rate. The ECB additionally announced that it would be trimming its Marginal Lending Facility (MLR) by a greater than anticipated 35 basis points to 0.40% and it’s Deposit Facility into negative territory. Effectively, this means that retail banks in Europe will be charged for holding funds with the regional central bank overnight.

EUR forecasts more of the same

The significant new loosening of monetary policy puts the eurozone central bank massively behind the curve in comparison with the world’s other three major central banks (the US Federal Reserve, Bank of Japan and Bank of England), all of whom introduced their own version of QE several years ago, (in the case of the BoJ, it was over a decade ago). The development is likely to weigh heavily on the Euro (EUR) during months to come, with the one crumb of solace from Draghi today being his assertion that there will be no further cuts to its key lending rate from the ECB.

Latest Pound Sterling & Euro Exchange Rates (05/06/2014)

The Pound Sterling to Euro exchange rate is trading up +0.59% at 1.23785 GBP/EUR.
The US Dollar to Euro exchange rate is trading up +0.42% at 0.73828 USD/EUR.
The Swiss Franc to Euro exchange rate is trading up +0.06% at 0.82013 CHF/EUR.
The Canadian Dollar to Euro exchange rate is trading up +0.45% at 0.67483 CAD/EUR.
The Hong Kong Dollar to Euro exchange rate is trading up +0.43% at 0.09523 HKD/EUR.
The Australian Dollar to Euro exchange rate is trading up +0.9% at 0.68780 AUD/EUR.

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