EUR/GBP churns near 0.8600 as central banks dominate headlines

EUR/USD cycled within familiar levels on Thursday as the pair’s respective central banks compete to reaffirm markets that progress is being made on inflation, and the path towards rate cuts is coming, but not quite yet. The Bank of England (BoE) took one step closer to delivering rate cuts with a 7-to-2 vote on holding rates steady, while talking points from multiple European Central Bank (ECB) officials reiterated the message that inflation will eventually return to ECB target levels.

Of the nine voting members of the BoE’s Monetary Policy Committee (MPC), all but two voted to keep rates on hold for another meeting. Markets expected an 8-to-1 vote with Dr. Swati Dhingra broadly expected to be the lone holdout for a single quarter-point cut. Deputy Governor for Markets and Banking Sir David Ramsden joined Dr. Dhingra in voting for a 25-basis-point rate trim, bringing the BoE one step closer to pushing down interest rates.

Friday brings a fresh print of UK Gross Domestic Product (GDP), which is expected to return to growth after the previous month’s contraction. Q1 UK GDP is forecast to print at 0.4% QoQ, compared to the previous quarter’s -0.3%.

EUR/GBP technical outlook

EUR/GBP remains hung up on intraday technical congestion near 0.8600 as 0.8620 threatens to solidify into technical resistance. The pair has been drifting higher, bolstered by the rising 200-hour Exponential Moving Average (EMA) at 0.8582.

Daily candlesticks show EUR/GBP scrambling to retake the last swing high above 0.8640 as the pair grapples with keeping aloft above the 200-day EMA at 0.8599. The EUR/GBP has traded higher for all but one of the last eight consecutive days, but a bearish turnaround from here will chalk in another lower high and send the pair back down to long-term consolidation near the 0.8500 handle.

EUR/GBP hourly chart

EUR/GBP daily chart