EUR/GBP traded flat around the 0.8600 level on Friday, heading for a weekly gain as the Bank of England’s (BoE) wait-and-see stance weighed on the British Pound (GBP) [1]. The BoE has kept its benchmark rate unchanged at 3.75% at its most recent meeting, lagging behind the Federal Reserve and European Central Bank (ECB) in raising interest rates this year [1]. BoE Governor Andrew Bailey stated that financial conditions have tightened and the UK is experiencing subdued pass-through of energy prices, but warned that prolonged high energy prices could make it harder to maintain the current Bank Rate stance [1].
Strategists at Brown Brothers Harriman noted a disconnect between market pricing and their assessment of UK policy, highlighting that the swaps curve implies about 100bps of BoE rate hikes in the next twelve months to 4.75%. However, they argue that the BoE may not need to tighten as much as markets expect, citing the UK economy operating below capacity, the Bank Rate being near the top of the BoE’s estimated neutral range (2% to 4%), and likely restrictive fiscal policy, all pointing to a lower-for-longer policy path [1].
The ECB has already raised interest rates twice this year, and markets are pricing in further tightening, which supports a bullish outlook for EUR/GBP. Technical indicators also point to a bullish bias, with EUR/GBP testing the key 0.8600 resistance zone after weeks of consolidation. A decisive close above 0.8600 would strengthen the bullish outlook and expose the 200-day Simple Moving Average (SMA) at 0.8639, followed by the 0.8700 barrier [1]. The RSI (14) reading near 60 and a slightly positive MACD suggest positive momentum, with dips likely to attract buying interest as long as price stays above short- and medium-term averages [1].
On the downside, initial support is seen at the 100-day SMA at 0.8592 and the 50-day SMA at 0.8566. A break below these levels could expose deeper support at 0.8530 and 0.8450 [1]. The British Pound was the strongest against the Australian Dollar this week, according to a table showing percentage changes against major currencies [1].
CONCLUSION
EUR/GBP is poised for further gains as the BoE maintains a dovish stance and the ECB continues tightening. Technical and fundamental factors support a bullish bias, with key resistance levels in focus. Market expectations for BoE rate hikes may be overstated, suggesting a lower-for-longer policy path.