Has Pound Sterling Euro Exchange Outlook GBP EUR Bottomed Out?

Published: Friday, 22 January 2016 07:00 BST - Written by Minesh Chaudhari

STORY LINK Has Pound Sterling Euro Exchange Outlook GBP EUR Bottomed Out?

GBP/EUR Exchange Rate Sank to 1.2922 after ECB Held Rates

The Pound Sterling euro exchange rate sank to 1.2922 GBP EUR following the European Central Bank’s confirmation that it was maintaining all three of its headline interest rates at their current level yesterday afternoon. However, the failure by the pair to push down through Wednesday’s intraday bottom of 1.2901 to a fresh 12 month low may now prove significant, given what followed.

Analysts were anticipating a non-event press conference from ECB President Mario Draghi at 1330hrs yesterday, but when the Italian moneyman took to the lectern, the shared currency came in for a renewed flurry of selling pressure. Most investors believed that last month’s decision from the ECB not to materially loosen its already ultra-loose monetary policy meant that there would be no fresh stimulus from the eurozone’s central bank for the remainder of 2016, but Draghi saw things differently.

Euro-Area Inflation Expectations Declined as Oil Prices Extend Rout

The ECB Supremo reminded the assembled journalists at yesterday’s Q&A session that global oil prices had plunged by some 40% since his Bank had taken the decision last month not to increase the EUR60 bn per month which it currently allocates to its controversial Quantitative Easing programme.

Draghi went on to assert that inflation expectations have consequently declined since the first half of December and went on to state that interest rates in the euroland will remain at their current basement levels, or lower, into the medium term.

GBP/EUR Exchange Rate Reached an Intraday Peak of 1.3082 Yesterday

This heavy hint that the ECB might be preparing to cut its headline repo rate below its current level of 0.05% hit the single currency, but it was Draghi’s announcement that his Bank will be re-assessing the scope of its ongoing Quantitative Easing programme at its March meeting which sent investors scrambling to get out of their euro-denominated assets.


The resultant move higher for the GBP EUR exchange rate sent the pair up to an intraday peak of 1.3082. Analysts forecast that there could be further near-term gains to follow.

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TAGS: Euro Forecasts Pound Euro Forecasts