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GBPEUR hits 20-month highs. Could 1.20 be within reach?

All eyes will be on the European Central Bank meeting today, which could have an impact on GBPEUR. Will it be enough to help the range-bound pair make a breakout?

Previously the ECB has not reacted to the supply shortages or rising energy prices and has played down inflationary concerns. However, the ECB may need to take action. Inflation is now at its highest level in more than a decade, and their economy still needs extensive support to reach its pre-pandemic levels. Today's meeting could be even more eventful than anticipated. 

The ECB has previously been fairly dovish as it believes the current situation is largely temporary. Any change to this sentiment could cause a significant market movement. In comparison, the UK will raise rates in the near term, and the economy is expected to bounce back to pre-covid levels by the beginning of 2022.

The budget yesterday weakened the pound slightly as the Chancellor revelled that UK borrowing requirements would be lower than anticipated over the coming years. The UK government will not be required to issue as much debt as previously expected.

After the ECB meeting today, we also have a Bank Of England policy announcement next week. It is a crucial time to keep an eye on the exchange rate.

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