EUR/GBP tests support at 0.8800 area with all eyes on the BoE

Guillermo Alcala FXStreet

ruled out

The Euro remains on its back foot against the Pound, testing levels below 0.8800.
Downbeat Eurozone Retail Sales have increased pressure on the common currency
The BoE is expected to stand pat on rates, although a quarter-point rate cut is not ruled out.

The Euro remains on its back foot against the British Pound for the second consecutive day on Thursday. The pair’s upside attempts seen during the Asian trading session have been capped at 0.8815, and is testing levels below 0.8800 at the time of writing, with markets awaiting the Bank of England’s (BoE) monetary policy decision.

Macroeconomic data from the Eurozone has failed to support the common currency. September’s Retail Sales figures, released by Eurostat, revealed that consumption dropped 0.1% from August, against market expectations of a 0.2% growth. Beyond that, the previous month’s reading was revised down to -0.1% from previous estimations of a 0.1% increase.

The British Pound, on the other hand, is showing strength ahead of the BoE monetary policy decision. The central bank is expected to leave its benchmark interest rate unchanged at 4%. However, market speculation about the possibility of a quarter-point rate cut has increased following Finance Minister Rachel Reeves' hint at significant tax rises on Wednesday.

Reeves rattled markets in an unusual pre-Budget speech at Downing Street, affirming that she will make the “necessary choices” in the Budget, pressured by the dire situation of the UK’s public finances. When questioned about Labour’s pledge not to hike taxes, Reeves refused to give a clear answer and said that she was “setting the context for the Budget”.

Economic Indicator

BoE Interest Rate Decision

The Bank of England (BoE) announces its interest rate decision at the end of its eight scheduled meetings per year. If the BoE is hawkish about the inflationary outlook of the economy and raises interest rates it is usually bullish for the Pound Sterling (GBP). Likewise, if the BoE adopts a dovish view on the UK economy and keeps interest rates unchanged, or cuts them, it is seen as bearish for GBP.

Economic Indicator

BoE Minutes

The minutes of the Bank of England (BoE) Monetary Policy Committee (MPC) meetings are published alongside the committee decision. The minutes give a full account of the policy discussion, including differences of view among members. They also record the votes of each member of the MPC. Generally speaking, if the BoE is hawkish about the inflationary outlook for the economy, then the markets see a higher possibility of a rate increase, and that is positive for the GBP.

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