Alert: British GBP/EUR exchange rate in massive boost to above 1.2 level

The British pound to euro exchange rate is trading 0.78 pct higher than seen at last night's closing level at 1.2.

The exchange rate took a sudden climb following reports that the ECB could be considering negative interest rates to boost the underwhelming Eurozone recovery.

This comes at a time when the talk over in the UK is about raising interest rates - it is only fitting that the pound to euro repositions itself higher in this environment.

Be Aware that all quotes here are taken from the inter-bank markets. Your bank will levy a discretionary spread when delivering you forex. However, an independent currency specialist will seek to undercut your bank's offer, thus delivering up to 5% more FX. Please learn more here.

So why has the pound rocketed higher against the euro?

This report from Bloomberg seems to have been the culprit: "The European Central Bank is considering a smaller-than-normal cut in the deposit rate if officials decide to take it negative for the first time, according to two people with knowledge of the debate."

It is also worth noting the euro has fallen against the US dollar:

"Between ECB official talking negative rates and Fed Pres talking Dec tapering, EUR/USD has nose dived almost 100 pips," says Kathy Lien at BK Asset Management.

The outlook will now certainly favour the British pound against the euro as the ECB has now created an environment in which uncertainty about future rate cuts exist.

We had a surprise rate cut earlier this month, and what today has done is to serve a reminder that another rate cut could come at anytime.

Meanwhile, the Bank of England is at pains to keep markets informed as to when the UK can expect an interest rate hike.

An environment in which the ECB is prone to cutting rates, and the Bank of England is prone to raising rates, will only add further upside pressure to the GBP/EUR.