EUR/GBP picks up pace and climbs to 3-week highs past 0.8600

EUR/GBP surpasses the 0.8600 mark and records new tops.
The BoE surprises markets by hiking 50 bps on Thursday.
The central bank still sees inflation dropping markedly this year.

Pablo Piovano FXStreet

EUR/GBP gathers traction and breaks above the 0.8600 yardstick in the wake of the unexpected 50 bps rate hike by the BoE at its event on Thursday.

EUR/GBP keeps the weekly recovery in place

EUR/GBP maintains the bid bias well and sound for the fourth session in a row on Thursday, extending at the same time the bounce off recent 2023 lows near 0.8520 (June 19).

In fact, the cross keeps the current trading range after the BoE caught markets off guard and hiked its policy rate by 50 bps to 5.00% at its gathering on Thursday.

The decision by the central bank to raise rates more than expected seems to have been justified by the sticky and elevated UK inflation figures, particularly following the unexpected uptick in June.

The vote to hike rates was not unanimous, with usual dove members Dhingra and Tenreyro leaning towards keeping rates on hold at 4.50%.

According to the bank’s statement, second-round effects on domestic wages and prices likely to take longer to unwind than they did to emerge, while consumer prices are expected to fall significantly this year, mostly due to energy costs.

EUR/GBP key levels

The cross is gaining 0.25% at 0.8624 and faces the next hurdle at 0.8699 (55-day SMA) followed by 0.8747 (200-day SMA) and then 0.8875 (monthly high April 25). On the other hand, the breakdown of 0.8518 (2023 low June 19) would expose 0.8386 (weekly low August 17 2022) and finally 0.8249 (monthly low April 14 2022).

Author

Pablo Piovano

FXStreet

Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.

AUD/USD consolidates above 0.7000; remains close to monthly top

AUD/USD holds steady above 0.7000 during the Asian session on Friday, trading just below the previous day's monthly low amid diverging forces. A hawkish RBA continues to support the Aussie, while the recent decline in US bond yields keeps the US Dollar depressed near a three-week low. However, oil-driven inflation fears reinforce Fed hike bets, which, along with geopolitical risks, could benefit the safe-haven buck and cap the currency pair.

USD/JPY bounces off one-month low; climbs to 157.00 amid reviving USD demand

USD/JPY rebounds from the 156.00 neighborhood, or a one-month low touched during Friday’s Asian session, with bulls looking to extend momentum beyond 157.00 amid the emergence of some US Dollar buying. Meanwhile, Japan's National CPI rose to a nine-month peak and reaffirmed BoJ rate-hike bets, which could support the Japanese Yen and cap gains for the currency pair.

Gold treads water around $4,000

Gold prices maintain its offered stance in place at the end of the week, hovering around the key $4,000 threshold per troy ounce. The persistent selling bias in the precious metal comes amid decent gains in the US Dollar and an acceptable rebound in US Treasury yields across the curve, all alongside further upside traction in crude oil prices.

Week ahead: Central bank and earnings bonanza could roil markets

After joining the rate-hike club in September, the Federal Reserve looks set to stand pat in October, waiting to assess more data before deciding to hike again. Whilst this isn’t an unusual move for a central bank, it somewhat contradicts Fed Chair Kevin Warsh’s new mantra of data dependency and zero forward guidance.

CFTC Report: WTI rally runs ahead of positioning

The week in one sentence: WTI prices surged while speculative longs were cut in the week to October 20, creating the clearest price/positioning divergence. Sterling and the Canadian Dollar led the constructive currency shift, while Yen longs also rebuilt. Speculators turned less constructive on the WTI, reducing their net exposure to around 89.3K contracts.

What November 3 means for the Fed's rate path and the US Dollar

The USD faces a decisive period ahead of the November 3 midterm elections. While markets anticipate another interest rate increase from the Fed in December, the battle for control of Congress could reshape fiscal policy expectations and, indirectly, the path of US monetary policy in 2027.