EUR/GBP DROPS TO NINE-MONTH LOWS, EYES 0.8500

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  • UK data and BoE rate hike expectations support the Pound. 
  • EUR/GBP breaks below 0.8540, to fresh multi-month lows.

The EUR/GBP is breaking below the support area of 0.8540 and is currently trading around 0.8530, its lowest level since August 2022. The cross resumed its downward trend after a brief pause and a short-lived rebound following the European Central Bank (ECB) meeting.

On Thursday, as expected, the ECB raised rates by 25 basis points. Despite the hawkish tone from President Lagarde, who mentioned that another hike in July was likely, the EUR/GBP only rose modestly approaching 0.8600 and then weakened again.

Next Thursday, the Bank of England (BoE) will announce its decision and a 25 basis points hike is expected. "Even though the BoE was among the first of the large central banks to engage in rate hikes, the UK's persistent inflation means it will be among the last to complete its hiking cycle," said analysts at Rabobank.

The expectation that the BoE will continue to raise rates after the ECB and the Fed end their tightening cycles has been supporting the Pound. This week, the Sterling has outperformed on those expectations and also following upbeat UK employment data.


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