Pound euro exchange rate (GBP/EUR) breaks below 1.21 as Wednesday rally is reversed
- Written by: Gary Howes
-
Wednesday saw impressive gains for the British pound against the euro; however mid-morning trade in London is seeing these gains erased.
The pound to euro exchange rate (GBP/EUR) is trading 0.2 pct lower on a day-to-day basis at 1.2093 at 09:22.
Yesterday afternoon witnessed an impressive rally in the GBP/EUR exchange rate with the 1.21 level being breached for the first time in a year.
(Note: The above quotes are taken from the wholesale spot markets. Your bank will charge a spread on the rate at their discretion. However, an independent FX provider will guarantee to undercut your bank's offer, thus delivering you up to 5% more currency. Please learn more here.)
However, selling pressure has increased through the course of the Thursday morning trading session with investors taking cash of the table ahead of the monetary policy decisions at both the Bank of England and European Central Bank.
The BoE and ECB in the spotlight
The ECB will give policy verdict followed by the President Draghi’s press conference.
"We expect status quo in ECB’s January policy (despite mounting disinflationnist pressures). Traders should expect higher price vol during Draghi’s speech. Although the dovish tone is already priced-in, any hint towards further policy easing should increase the negative pressures on EUR," says Ipek Ozkardeskaya at Swissquote Bank.
In UK, the BoE’s policy decision should gather less enthusiasm.
"Well bid above 1.6400, the Cable extended gains to 1.6472 in New York. There is room for further upside if 1.6420/26 (fibo 23.6% retracement on Nov 13’ – Jan 14’ rally) support holds," says Ozkardeskaya in reference to the headline GBP/USD rate which will provide guidance for the pound euro exchange rate GBP/EUR. Should the former continue to rallly it is likely the GBP/EUR will remain well bid.
The BoE and ECB will give policy verdict at 12:00 GMT and 12:45 GMT respectively.
Traders are also focused on French November Trade Balance, Italian 3Q Deficit to GDP ytd, UK November Trade Balance, Euro-Zone December Consumer, Industrial, Economic and Services Confidence & Business Climate Indicators, German November Industrial Production m/m & y/y, Canadian December Housing Starts & November Building Permits, US January 4th Initial Jobless Claims & December 28th Continuing Claims.
