The Bank of England is raising interest rates. EURGBP is rising

Courses EURGBP looks very interesting, gaining after the dovish sitting Bank of England (BoE). The BoE raised the interest rate by 25 bp in line with market expectations, but then changed its forecasts for interest rate policy from a moderate tightening "likely to be appropriate" to "may be appropriate".

Split decision

MPC members voted 8-1 for a rate hike, while at the last meeting 4 people did not agree to a 50 bp rate hike. Moreover, the BoE suggested that the market pricing of the bank rate has become too tight and that inflation based on these rates will be below the target at the end of the forecast horizon. This led to a decline in the number of interest rate hikes until the end of the year from 7 before the meeting to 5 after it. This weakened the pound, but the euro also strengthened as the market continues to see a positive solution to the conflict between Ukraine and Russia. 

EUR / GBP chart, D1 interval. Source: Pepperstone

Technically, the EURGBP is very close to the 200-day SMA and the upper trendline of the downtrend channel. Also nearby is the previous peak at 0,847. The RSI indicator is also approaching the resistance 63,68, which marked the previous price peaks. If these levels are broken we could witness an impulse towards 0,85. 

About the author

Luke Suddards is a research strategist who generates valuable insights for a growing customer base Pepperstone through unique analysis, trading ideas and risk management strategies. Luke earned a BA in Economics and Finance, followed by a Postgraduate Honors in Finance with a cum laude degree. His academic background and numerous internships in the financial sector have provided him with a broad and solid understanding of the financial markets.

Luke started his own market analysis and financial education company that dealt with multi-asset analysis for retail and institutional clients. After writing his own book on technical analysis and developing trading strategies, Luke knows how to use technical analysis tools to maximize his trading success. His style of analysis can best be described as a hybrid event-driven fundamental and technical strategy.

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