The EURGBP treads cautiously ahead of the Bank of England (BoE) interest rate decision, oscillating between hawkish hints and dovish hopes. While a rate hike is unlikely, policymakers are expected to acknowledge slowing inflation, potentially removing hawkish language from the statement. This could reignite EURGBP’s recent bullish momentum, currently supported by cooling eurozone inflation and a broadly weaker dollar.
However, the BoE might reiterate its cautious stance due to tight labour markets and underlying inflation concerns. This hawkish tilt, coupled with mixed economic data like slowing wage growth and sluggish GDP performance, could dampen EURGBP’s enthusiasm. Market expectations lean towards a May rate cut, but any hawkish signals from the BoE could delay these hopes and push EURGBP lower.
Technical
The 4-hour chart shows that the currency pair currently trades at 0.85333, exhibiting upward momentum ahead of the BoE decision. The price action hovers around the 20-SMA (green line), below the downward-sloping 50-SMA (blue line) and 100-SMA (orange line). The RSI at 47.85 suggests a bullish bias, with potential short-term opportunities emerging.
Short-term opportunities exist towards the 38.20% support (0.85531) if the price breaks above the 23.60% resistance (0.85414). A sustained break above could target 50.00% (0.85655) and 61.80% (0.85779) resistance levels. However, a sustained push lower could offer short-term trading opportunities towards the initial support level at the 0.85129 price level. A break below the initial support would likely bring the 0.84986 support level into play in the short term.
Summary
EURGBP’s path hinges on the BoE’s stance. A hawkish tilt could trigger a rally towards the 23.60% Fibonacci level, potentially extending to higher levels if the momentum persists. Conversely, dovish signals could push the pair back towards the 38.20% level and potentially lower if selling pressure intensifies. Ultimately, the BoE’s language and voting split will be the game changers, making this a data-driven and potentially volatile trading session.
Sources: TradingView, Trading Economics, Reuters, Dow Jones Newswire, EUROSTAT, Bank of England.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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