GBP/EUR rates push back above 1.26 (Mike Vaughan)

Sterling exchange rates have pushed back through the 1.26 level following both the Bank of England and European Central Bank keeping their base rates on hold. This was not a surprise and it was the press conference by Mario Draghi that was to cause the market shoft.

After announcing measures in June to kick-start eurozone growth, the ECB says it will now keep rates low “for an extended period of time in view of the current outlook for inflation”.And ECB president Mario Draghi warned there would be a “continued moderate and uneven recovery” in the eurozone.

With Italy now officially back in the recession, and France’s President Francois Hollande warning about a “real deflationary risk” in Europe the eurozone is still under pressure and this could reflect or Euro rates. For this reason I believe GBP/EUR will remain consistently above the 1.26 level.

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