EUR/GBP subdued below 0.8500 after BOE decision

The EUR/GBP cross maintained its offered tone and continued trading below 0.8500 handle after BOE's MPC decided to leave monetary policy unchanged.

The BOE kept its benchmark interest rates unchanged at a record low of 0.25% and maintained government bond purchases at £435 billion and corporate bond purchases at up to £10 billion. The minutes revealed that the economic outlook have not changed much from August meeting while MPC raised Q3 GDP forecast to +0.3% q/q vs +0.1% and expected inflation to be a little lower than forecast.

The cross had a muted reaction to the announcement, initially tipped higher to 0.8510 before quickly retracing back to 0.8485 level, and remained stuck in a narrow trading band below 0.8500 handle. Next in focus would be US macro releases, which would possibly determine the Fed's next policy action at its upcoming policy meeting on September 20-21 and could provide fresh impetus for both, the EUR/USD and the GBP/USD, eventually driving the EUR/GBP cross.

Technical outlook

Dukascopy Bank team notes, "A rising wedge holds EUR/GBP movements in the hourly chart, implying bearish potential in the nearest future if 0.8465, the bottom trend-line, is breached. The pair will try to erode 0.8440, the 200-hour SMA, and a break below would expose the 0.8423 demand level. What makes levels beneath 0.8379 unattractive is the major buying pressure stemming from the bottom two-month channel trend-line. The channel gives reason to believe that the wedge could be severely dominated by a distinct superior uptrend, implying that an upside breakout is still very much in the picture. In case the pair goes with the rising scenario, it will still face a lot of resistance even before the upper wedge trend-line, such as the daily and monthly Pivot Points at 0.8433 and 0.8498 respectively, the daily and weekly R1s at 0.8527 and 0.8532, until the 0.8554 upper trend-line level is reached."