Alert: Pound euro exchange rate (GBP/EUR) surges to hit 1.21 barrier
- Written by: Gary Howes
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Wednesday has seen the meteoric rise of the pound to euro exchange rate which has shot higher to hit the 1.21 level.
At 17:30 in London we see the pound to euro exchange rate is trading 0.66 pct higher at 1.2128.
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We have note seen these levels in the GBP/EUR rate since the 11th of January 2013.
The move higher comes amidst a broadly euro-negative market, we note the EUR/USD is down some 0.3 pct and this will certainly be aiding sterling.
Add to this the broadly pro-GBP environment being seen on markets this week and one would argue this break was long overdue.
Risks lie ahead - Bank of England MPC decision tomorrow
However, we could see a sharp pullback tomorrow morning when the Bank of England release the minutes of the first MPC meeting of 2014.
The market expects no change in interest rates or asset purchases.
There has been some expectation that the BOE could lower the economic threshold for forward guidance, currently it is 7%, some expect this to be lowered to 6.5%.
This would most certainly be a GBP-negative and this could pressure the pound to euro exchange rate lower.
"However, we doubt that the BOE will take the plunge at this meeting, and instead it may choose to leave any changes to February’s Inflation Report that will be delivered on 12th February," counters Kathleen Brooks at Forex.com.
Instead the market may have to wait for the BOE minutes (due 22nd Jan) to get a glimpse of the BOE’s thinking.
The last minutes were notable because of a reference to a strong pound and its potential to de-rail the UK’s economic recovery.
