GBP/EUR exchange rate: GBP/EUR sinks as shared currency takes heart from Italian Senate vote + Draghi reassurances

A look at the currency markets confirms the Euro currently enjoys upside momentum against the pound sterling:

The pound sterling to euro exchange rate is 0.14 pct in the red in afternoon trade at 1.1959.
The euro to pound exchange rate is thus at 0.8362.

Driving the Euro higher was news that a confidence vote in the Italian senate went the way of PM Enrico Letta.

Letta's victory came about after a dramatic u-turn staged by Sivio Berlusconi's People of Liberty party who decided to back the PM.

"Putting together expectations and the fact that Italy needs a government which produces institutional and structural reforms, we have decided – not without a sense of internal anguish – to support the vote of confidence," Mr Berlusconi said.

Draghi and the ECB

Another boost for the Euro came when the European Central Bank (ECB) has kept its benchmark interest rate on hold at 0.5%.

This in itself was expected, but as always the interesting stuff came in the Mario Draghi press conference after the statement.

Giving guidance Draghi said the ECB is not short on resources should it need to once more intervene in Europe's inter-bank markets.

This will soothe market nerves that the ECB is by no means complacent when it comes to dealing with Europe's financial problems.

While the Euro enjoys a relief rally against the British pound it is worth noting that momentum remains firmly stacked against the Euro.

Geoffrey Yu at UBS says he is bearish on EUR/GBP: "With the trending and momentum tools pointing lower, the risk is for more downside. Support is at 0.8285 ahead of 0.8160. Resistance is at 0.8471."

However, it is worth noting that a correction lower in sterling is due, as Piet Lammens at KBC Markets notes:

"The outlook for sterling is positive, but a downward correction might be in store, which would allow us to take on more sterling exposure."