EUR/GBP ticks up to 0.8680 after BoE’s decision, remains in range

The Euro bounced up from session lows at 0.8665 following the BoE's monetary policy decision.
The Bank of England left interest rates on hold at 4% with two MPC members voting for a rate cut.
EUR/GBP remains trading within a narrow range below Tuesday's high, at the 0.8700 area.

Guillermo Alcala FXStreet

The Euro edged higher after the Bank of England confirmed market expectations and stood pat on interest rates. The pair bounced up from session lows, at the 0.8665 area, to 0,8680 but remains looking for direction within Wednesday’s trading range.

The Bank of England left its Repo Rate unchanged at 4%, as widely expected, after having trimmed it by 25 basis points in July. Within the committee, seven policymakers voted for the status quo, up from five in July, and two leaned for a further rate cut, down from 5 in July.

The bank’s statement highlights the 3.8% yearly inflation and the subdued underlying GDP growth, pointing to a gradual and careful approach to further monetary easing, leaving all chances open for the November 16 meeting.

Investors’ reaction to the news has been muted so far. With both currencies appreciating against the US Dollar, the EUR USD remains treading water within a narrow range above 0.8660, not far from the two-week high, at 0.8700 hit on Tuesday.

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 MPC Vote Rate Cut

Interest rates are set by the Bank of England’s (BoE) Monetary Policy Committee (MPC). The MPC sets an interest rate it judges will enable the BoE’s inflation target to be met. It is comprised of nine members – the Governor, the three Deputy Governors, the Bank's Chief Economist and four external members appointed directly by the Chancellor. Investors look at each member’s vote in order to seek cues over how unanimous was the decision on interest rates.

EUR/USD remains sidelined around 1.1600

EUR/USD clings to its decent gains on Monday and continues to move in a consolidative mood around the 1.1600 region. Improved risk appetite following the US-Iran agreement to reopen the Strait of Hormuz continues to weigh on the US Dollar, lending support to the risk complex. Looking ahead, investors are likely to remain on the sidelines ahead of Wednesday's FOMC meeting.

GBP/USD retreats from tops, back to 1.3420

GBP/USD keeps its advance past the 1.3400 yardstick at the beginning of the week. In the meantime, Cable continues to draw support from improved market sentiment following reports that the US and Iran have reached a framework agreement aimed at ending the conflict and reopening the Strait of Hormuz.

Gold stays firm, still below $4,400

Gold builds on its recent gains on Monday, climbing well north of the $4,300 mark per troy ounce. The yellow metal benefits from renewed selling pressure on the Greenback as investors reassess the implications of the US-Iran agreement to end hostilities and reopen the Strait of Hormuz. Market participants now turn their attention to Wednesday's FOMC gathering.