Pound Sterling to Euro (GBP/EUR) Exchange Rate- Euro surges after ECB policy meeting

The Euro made gains against the Pound and reached its highest level of the year against the US Dollar on Thursday after the European Central Bank refrained from tightening monetary policy and increased its growth forecasts for the Eurozone economy.

The Euro made a sharp gain after ECB President Mario Draghi announced that the Central Bank chose to leave interest rates at the record low level of 0.25%. It also said that it will maintain its forward guidance on rates, saying that interest rates will remain on hold for an extended length of time.

Mr Draghi said at his monthly press conference which followed the rate announcement that he expects the Eurozone economy will grow by 1.2% this year. The figure was better than the 1.1% growth forecast issued by the central bank last year.

“The Euro is rising on Draghi’s upbeat view. The notion the recovery proceeds – albeit at a slow pace and remains fragile, but is going to plan. The ECB is emboldened by last week’s turn in inflation and bank-lending data,” said a foreign exchange strategist.

Draghi downgraded the ECB’s inflation outlook for 2014 to 1.0%, from the 1.1% forecast at the end of last year – well below the central bank’s targeted level of “close to” 2%.

The Pound was little moved earlier in the session after the Bank of England chose to maintain interest rates at the record low level of 0.5% and kept its quantitative easing programme unchanged at £375 billion.