EUR/GBP declined after Bailey’s words

The EUR/GBP pair stands at 0.8555, suffering mild losses in Tuesday's session.
Divergences between the ECB and BoE are driving the pair.
Markets are fully pricing in a cut by the BoE in August.

Patricio Martín FXStreet

In Tuesday's session, the EUR/GBP traded mildly lower at 0.8555 with the cross easing from daily highs following Andrew Bailey’s comments.

The Bank of England (BOE) Governor Andrew Bailey warned on Tuesday that the bank need not wait for inflation to reach the target before cutting rates and other than that he didn’t provide any fresh guidance stating that “I can't say when or how much rates will be cut”. Current market expectations perceive virtually no chance of a cut on March 21, rising to nearly 25% by May 9 and rising past 60% by June 20. Rate reductions are fully priced in by August 1.

On the European Central Bank (ECB) side, investors are seeing more easing than the BoE, between 100 and 125 bps, priced in to start in June. However, incoming data will shape the expectations and timing of the easing cycles.

EUR/GBP technical analysis

On the technical front, the Relative Strength Index (RSI) for the EURGBP pair shows a cooling momentum as it hovers within neutral territory. There's been a slight decrease in the daily RSI level suggesting a market slowdown. Meanwhile, as for the Moving Average Convergence Divergence (MACD), the histogram prints flat green bars, aligning with the RSI. Moreover, the overall trend is still negative as the pair trades below the 100 and 200-day Simple Moving Averages (SMA), but if the buyers hold above the 20-day average, the pair could see some additional upside.

EUR/GBP daily chart

Author

Patricio Martín

FXStreet

Patricio is an economist from Argentina passionate about global finance and understanding the daily movements of the markets.

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