In a surprise move today, the ECB announced a rate cut of 25 basis points. The cut to 1.25 percent, the first move by new ECB president Mario Draghi, surprised nearly everyone. The move has given the UK pound some strength against the euro, and provided the pound with some strength against other currencies as well.
As expected, the Bank of England is holding its own rate steady at 0.5 percent. Additionally, the BOE is planning to continue quantitative easing efforts, to the tune of 75 billion pounds. MPC members are still trying to balance Britain’s high inflation with the need for economic stimulus, and it shows. Normally, such an announcement would result in a lower pound, but with the unexpected move by the ECB, and with better equities on good employment news in the US, GBP is doing better.
In other rather recent developments, it appears as though Greek Prime Minister George Papandreou has agreed to step down, and a coalition government will form in Greece. This still leaves the fate of the Greek’s membership in the eurozone up in the air, and no one is sure what will happen next, leaving EUR/GBP in a position of weakness.
At 14:07 GMT, EUR/GBP is down to 0.8573 from the open at 0.8619. GBP/USD is a little bit higher at 1.5960, up from the open at 1.5951. GBP/CAD is also higher, moving to 1.6233 from the open at 1.6179.
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