The EUR/GBP price continued its bullish trend on Friday as investors focused on the latest decision by the Bank of England (BoE). It soared to a high of 0.8788, which was the highest level since February 2021. The pair has risen by more than 6% from the lowest level this year.
Cautious Bank of England
The EUR to GBP exchange rate continued rising after the latest BoE rate decision. In a statement, the bank decided to hike interest rates by 0.50% for the second straight time. This means that the bank has hiked interest rates seven times since December last year and hinted that it will continue hiking in the coming months.
Still, the interest rate hike was lower than what other central banks have done. For example, the Swiss National Bank (SNB) hiked by a 75 basis point rate hike. This was notable since SNB was recently one of the most dovish central banks in the world. At the same time, the decision showed that there were some divisions in the BoE. In a note, analysts at ING wrote that:
“A stronger dollar also favours GBP/USD to 1.10, while even EUR/GBP can press 0.88. And don’t expect UK authorities to emulate their Japanese counterparts by trying to support the pound with FX intervention.”
Still, the UK and the overall European economy is at a difficult spot due to the rising gas prices. Energy costs have rallied so much such that many companies have started to suspend their operations. The situation worsened this year after Russia escalated its war in Ukraine.
The daily chart shows that the EUR/GBP price has been in a strong bullish trend in the past few weeks. This week, the pair managed to move above the important resistance level at 0.8723, which was the highest point on June 15.
The pair has managed to move above the 25-day and 50-day moving averages. It has also formed what looks like a cup and handle pattern, which is usually a bullish sign. Therefore, there is a likelihood that the pair will keep rising as buyers target the next key resistance point at 0.8800. A drop below the support at 0.8650 will invalidate the bullish view.