EUR/GBP: Fed Stimulus Plan Lifts the Euro

The British pound advanced versus the Euro in the previous European trading exchanges on expectations that the Federal Reserve would announce a third round of quantitative easing to support the US economy. The Sterling also found support from the increase in house prices for the first time in three months in August, indicating that the housing market is recovering from a sluggish buying activity in the summer. In Germany, economic institutes reduced their respective outlook for the Euro Zone’s largest economy, citing the impact of the debt crisis. In today’s European trading exchanges, the Euro is likely to rise versus the Cable.

The single currency is expected to rise as the Federal Reserve’s move to expand monetary easing triggered risk-on sentiment. Fed Chairman Ben Bernanke said that the central bank would buy 40 Billion of mortgage debt per month and would continue to purchases until the labor market shows significant improvements.

The German court’s decision to favor the European Stability Mechanism, the Euro Zone bailout fund, is also seen to buoy the shared currency, clearing a major obstacle for the European leaders to extend financial aid to troubled Euro Zone economies. Today, the Eurogroup officials are slated to meet to discuss whether Spain should seek for financial help after the European Central Bank announced that it would purchase government bonds in unlimited quantities to drive down borrowing costs. Indications of progress are seen to support the shared currency. Given all these factors, a long position for the EUR/GBP is recommended in today‚Äôs trading exchanges.

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