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EUR/GBP: the ECB versus the Bank of England

The rate between the euro (EUR) and the pound sterling (GBP) is one of the most traded pairs in the world. Its dynamics are dictated by the monetary policy gap between two central banks : the European Central Bank (ECB) and the Bank of England (BoE).

In practice, the pair reads the other way round from the usual : one pound trades for more than one euro, so that the EUR/GBP rate most often oscillates between 0.83 and 0.90. When the Bank of England raises its rates faster than the ECB, the pound tends to appreciate (the EUR/GBP rate falls) ; conversely, a more marked tightening by the ECB or British inflation that eases supports the euro.

Key markers : the Brexit referendum of June 2016 sent the pound tumbling, pushing EUR/GBP above 0.90 ; the pair has since remained sensitive to inflation announcements (ONS), to the decisions of the BoE's Monetary Policy Committee (MPC) and to the eurozone's economic climate. For a payment in the United Kingdom, monitor the real rate and trigger your exchange at the right moment.

On the same topic, discover how to calculate an exchange rate and lock in a favourable rate.

Written by Brice Delhome.