Euro sterling exchange rate today (Wed 23/10): Why is the GBP struggling against the EUR?

At 13:44 in London euro sterling is quoted at 0.8518.

The euro sterling exchange rate (EUR GBP) is thus trading 0.33 pct higher than seen at last night's closing level.

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Why is the sterling struggling against the euro?


Euro strength: The all-round strength of the euro would appear to be the key factor behind the upward bias in the euro to pound exchange rate at present.

The euro has found much favour amongst currency traders on the observation that Fed tapering may be pushed back till later next year.

The positive tone in EUR-USD has simply sucked EUR-GBP up in its wake.

"As the probability that the Fed will postpone its scaling down of QE increases, we will also postpone our expectations of the coming USD strengthening. After yesterday's weak report, there is a high probability that EURUSD will continue up towards 139-140 over the period until the end of the year," says Leander Dreyer at Jyske Bank.

British pound weakness: The GBP has continued to lose ground against the euro despite today's release of the minutes of October's Bank of England  MPC meeting.

Indeed, the Bank appeared to be rather chipper saying they were happy with the progress made on the economic front and overall, the Committee was not too worried about the ensuing US government shut down and fiscal crisis.

But, "while the overall picture of the UK economy may be one of strength, there is a pocket of weakness. The minutes noted that exports and trade had shown no growth in Q2, and a strengthening pound since then is unlikely to boost UK exports in the second half of this year," says Kathleen Brooks at Forex.com.

This is significant not just for the exporters, but also for the UK’s attempts at re-balancing its economy.

"We are becoming reliant on the housing market again, just as we did in the lead up to the 2007 financial crisis. While this may be a problem for another day, could we be sowing the seeds of the next crisis? We shall have to see," says Brooks.