Pound to Euro Exchange Rate News Index

The pound sterling to euro exchange rate has rallied this morning in the wake of some good economic data out of the UK.

The GBP/EUR is quoted at 1.1803 while the EUR/GBP exchange rate is thus at 0.8472.

Please note that your bank will access the above market rates but will sell on currency to you at another rate; this spread is where they make their money. However, an independent FX provider can also access currency at the above rates BUT will actively undercut the offer made by your bank, thus delivering you up to 5% more currency. Please find out more here.

Why has the pound sterling shot higher?

This rally being witnessed by the GBP will be welcomed by those holding out for higher exchange rates when we consider the pressure the UK currency has been under as of late.

But what has caused today's exchange rate rally?

It is all to do with data. It was shown by the UK's official statistics body today that inflation remains stubbornly high.

Keeping inflation low remains the Bank of England's number one objective; and historically central banks fight inflation by raising interest rates to help keep a lid on the amount of money flowing through the economy.

When money becomes expensive to borrow people will borrow less, thus spend less and thus the upside pressure to prices will be contained.

Currency markets are therefore betting that the high inflation rate will see the Bank of England forced to raise the interest rate sooner than they would like.

For those who want to know the exact details, here they are:

Consumer Price Index (YoY) (Sep): Comes in at 2.7%, unchanged on last month. Beats expectations for a fall back to 2.6%.

Consumer Price Index (MoM) (Sep): Comes in at 0.4%, unchanged on last month. Expectations were for a reading at 0.3%.

Core Consumer Price Index (YoY) (Sep): Comes in at 2.2%, last month this read at 2%.

Turning to the broader currency market themes, we see the same old US debt story continues.

"With the days passing by, the US government seems to be crawling towards a debt solution and there are high hopes that a budget deal will be reached within a day or so. These hopes are keeping the market from risk aversion mode, although how long this will last is uncertain," says Sasha Nugent at Caxton FX.

The euro meanwhile will also make another attempt to strengthen as German ZEW Economic Sentiment will be released and any upside surprise here is likely to be welcomed by the market.