- EURGBP gains strong positive traction and rises to a one-week high on Thursday.
- The British pound weakens in reaction to the Bank of England’s moderate interest rate hike and remains supportive.
- The strength of the dollar weighs on the euro and could prevent any significant gains.
The crossing EUR/GBP it captures new offers during the middle of the European session and reaches a maximum of a week and a half after the Bank of England announced its political decision. The cross is currently above the 0.8700 level and is looking to build on its recent bounce from the nearly two-month low reached last week.
The British pound weakens in reaction to the Bank of England’s moderate rate hike and turns out to be a key factor providing a good boost to the EURGBP cross. As expected, the British central bank decided to raise interest rates by 75 basis points, which is the biggest increase since 1989. However, the BoE indicated a terminal peak lower than the 5.20% currently quoted in the markets. This, coupled with the fact that two policymakers voted for a less aggressive move, weighs on the British pound.
In the monetary policy statement that accompanies the statement, the BOE lowers its growth forecasts for the third quarter from -0.1% to -0.5%, but raises the forecast for the whole of GDP in 2022 to +4.25% from +3.50 % previous. However, the central bank pointed out that there are considerable uncertainties around the outlook and expects GDP to fall by the end of 2023. For his part, the governor of the BoE, Andrew Baily, stated during the press conference after the meeting that the bank rate may have to go higher because inflation is too high.
Bailey’s remarks fail to impress pound bulls, although the heavily bid tone surrounding the shared currency, amid the dollar’s post-FOMC rally, is keeping the EUR/GBP cross at bay. Therefore, any further move higher is more likely to face stiff resistance and remain capped near the 0.8760-0.8780 supply zone. This, in turn, warrants some caution for aggressive bull traders, at least for now, and positioning for a further intraday appreciation move.
Technical levels to watch
Source: Fx Street
With 6 years of experience, I bring to the table captivating and informative writing in the world news category. My expertise covers a range of industries, including tourism, technology, forex and stocks. From brief social media posts to in-depth articles, I am dedicated to creating compelling content for various platforms.
