GBP to EUR Breaks Below 1.16

"The UK will steal the show on the announcement front today, as the BoE Governor Mark Carney will make his first official speech ahead of the central bank’s rate announcement at the end of next week," says Sasha Nugent at Caxton FX.

Nugent says the outlook for the Pound Sterling against the Euro is currently negatively biased: "After the German Ifo Data was released yesterday, the downward trend in the GBPEUR rate has continued as investors become more encouraged by the progress made by the euro area."

Are we facing the possibility of more quantitative easing?

Should quantitative easing be brought back into the equation expect the pound to euro exchange rate to fall flat.

Lloyds Bank Research explain that this is indeed a possibility:

"The event in Nottingham will mark Mr Carney’s first public speech and he is likely to use the opportunity to reaffirm the Bank’s intentions to keep interest rates at an all-time low for the foreseeable future.

"The MPC’s adoption of forward guidance earlier this month was intended to deliver this message, however, market reaction since the announcement has seen UK bond yields rise sharply.

"This partly reflects expectations that the Federal Reserve will begin tapering its QE programme from September, but also a response to the recent flow of stronger domestic economic data.

"Mr Carney is likely to also play down the strength of the current upswing and point to the recovery being far from being satisfactory.

"Recent comments from MPC members Weale and Bean have suggested that QE continues to remain an option for the MPC. Today’s speech will be closely watched for any sign that the Committee could follow up with more concrete stimulus - including the possibility of more QE."

Eurozone data disappoints

Meanwhile, the eurozone has released a number of figures including the GfK German Consumer Climate which came in below expectations at 6.9 from 7.0 previously.

Important housing data for the US is due at 15:00 and will help to signal the stability of the US recovery.