Pound Sterling to Euro Exchange Rate Today: VIX Spikes And GBP to EUR Conversion Falls

Modified: Saturday, 4 October 2014 14:43 BST - Written by John Cameron

STORY LINK Pound Sterling to Euro Exchange Rate Today: VIX Spikes And GBP to EUR Conversion Falls

Foreign exchange rate analysts forecast a rough ride for the eurozone economy following yesterday's flimsy policy announcement from the European Central Bank. The GBP EUR exchange rate fell in the aftermath, but economists predict this may be temporary.

The global markets were distinctly underwhelmed with the plans revealed yesterday by the European Central Bank to steer the euroland away from deflation. ECB President Mario Draghi announced last month that his Bank would be starting monetary easing in October and he filled the markets in on the details yesterday. Europe’s reserve bank will be making up to €1tn available to his region’s retail banks by buying up asset backed securities.

However, at this stage the ECB will not be making purchases of sovereign debt – this was the type of all-out Quantitative Easing which some analysts suggest is necessary to heal the ailing European economy. The fact that Draghi also ruled out any further cuts to interest rates in the euro area added to the mood of unease surrounding the future prospects of mainland Europe. The market reaction to the news was clear-cut, with continental Europe’s two major bourses shedding value; Paris’s Cac 40 closed down by 2.81% on the day, while Frankfurt’s Dax lost 1.99%.

Elsewhere, the Pound Sterling put in a meek performance on the session, losing almost 1% on the day aginst the single currency as market participants expressed their fears that a renewed slowdown in Europe might impact on the UK’s economic recovery.

Meanwhile, ongoing mass protests in Hong Kong continued to sap the market of appetite for risk, while an apparent flare-up in the fighting in eastern Ukraine added to the mood of gloom amongst investors. The news that a Swiss Red Cross worker had died in a bomb blast in the organisation’s Donetsk headquarters yesterday acted as a salutary reminder to investors of the high risk of conflict on the eastern edge of the euroland. Geo-political concerns caused the VIX ‘Fear Index’ to spike on the session and any further near-term gains for the closely-watched gauge of sentiment are likely to send the Pound Sterling Australian Dollar (GBP/AUD) and the Pound Sterling New Zealand Dollar (GBP/NZD) exchange rates sharply higher once more.

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