Pound to euro settles in above 1.2 as sterling recovers recent losses sustained vs the euro

Last Updated on Thursday, 16 February 2012 16:14 Written by Will Peters Thursday, 16 February 2012 16:13

The pound to euro exchange rate is 0.5pct up on yesterday, we see pound euro at 1.2070 at 15:45 in London.

From a technical perspective we see that the euro pound rate traded in the 0.8375 area at the open of the European markets.

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During the morning session, EUR/GBP was captured in a gradual uptrend. Sentiment on Europe and on the euro wasn’t too bad. However, the move was in the first place sterling weakness.

The UK labour market data were slightly weaker than expected but the decline of sterling was in the first place due to investor caution ahead of the publication of the inflation report and the BoE press conference.

At the conference, the BoE kept its soft tone on the UK economy.

At the same time, the Bank raised the medium term inflation forecast more than expected (to 1.8%).

Given this inflation forecast, there was no reason for (currency) markets to front run on the possibility of more asset purchases.

Sterling reversed the morning losses and EUR/GBP returned to the 0.8370 area. Early in the afternoon, the euro spiked lower on headlines that euro zone finance ministers were considering another delay of the Greek rescue package.

EUR/GBP joined the broader decline of the euro and closed the session at 0.8326, compared to the 0.8370 opening area.