EUR/GBP broke its post-BOE bearish consolidation phase to the downside and came under aggressive selling pressure as the ongoing rally in GBP/USD gathered steam, after BOE policymaker Vlieghe’s hawkish remarks further bolstered the case for a BOE rate hike as early as this November.
Cable jumped nearly 2 big figures to head for a test of 1.3600 levels on BOE board member Vlieghe’s (a dove-turned hawk) comments, which cited that the appropriate time for rate hike might be as early as in the coming months.
Meanwhile, the pound also remains lifted across the board, in the wake of yesterday’s hawkish signals delivered by the BOE Governor Carney during the post-policy press conference.
Meanwhile, it remains to be seen if the cross can extend the declines towards July 14th low of 0.8743 amid North Korea risks and the latest London terror attack, which could keep the pound on the defensive.
Also, the cross looks forward to the key US macro news for fresh incentives on both the EUR and GBP, as markets digest the latest hawkish twist delivered by the ECB and BOE.
EUR/GBP Technical Set-up
Karen Jones, Analyst at Commerzbank writes: “EUR/GBP has sold off sharply and continues to target the .8743 14th July low. Initial support is the .8813 50% retracement of the move up from May. Intraday rallies should now struggle .9065/90. Initial supports ahead of here lie at .8930/.8813, these are the 38.2% and 50% retracements of the move up from April. Intraday rallies are indicated to hold below 8945/90.”
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