The Sterling/Euro exchange rate improved to a 19-month high of 1.2250 this week as the Pound was given a major boost by the news that the Bank of England’s Monetary Policy Committee voted 8-1 in favour of maintaining its current asset purchasing target of 325 billion Pounds. It seems that the threat of further Quantitative Easing has significantly subdued in the UK and investors have reacted extremely positively to the news with the Pound rallying against all of the major currencies since the announcement.
Sterling was also supported by a stronger than expected set of Unemployment data, the overall Unemployment Rate dropped from 8.4% to 8.3% and the nominal figure decreased by 35,000. This latest set of strong UK ecostats combined with a marked improvement in Manufacturing, Services, and Construction PMI’s have allowed the Pound to settle well above the 1.2000 mark against the Euro.
Any figure above 1.2000 is a very good exchange rate for the Pound and the current level of 1.2250 marks a high not seen since August 2010. The immediate future of the Pound to Euro exchange rate hinges on an important UK GDP report for the 1st Quarter of 2012 that is released at the end of the month. If the report comes in positive for the UK economy then we could see Sterling push ahead and challenge 41-month highs in the region of 1.2400. But be mindful that a negative GDP report could send the Pound spiralling downwards towards 1.2000, and if that happens, the current strong rates might go into hiding for another 19 months!
