EURGBP is under selling pressure after the Bank of England almost eliminated the possibilities for negative interest rates under the current economic situation. The less dovish tone lifted the British pound against the USD and EUR.
Bank of England Keeps Interest Rates Unchanged
The Bank of England (BoE) kept rates unchanged at record low levels of 0.1% and left the asset purchases programme unchanged. Andrew Haldane voted against an increase of purchase UK government bonds by an additional 100 billion.
The central bank (BOE) expects the economy to contract by 9.5% in 2020 before returning to growth by 9% in 2021. The previous projection by the BoE was for a GDP contraction of 14%. Bank of England (BoE) warned that the unemployment rate would remain high around 7.5% this year. The inflation expected to be subdued and will reach 2% in two years.
Regarding negative interest rates, the central bank is reviewing that scenario but noted that negative rates would weaken the UK financial sector more, thus destabilizing the already fragile UK economy.
On the economic data, the United Kingdom Construction PMI registered in at 58.1, topping the expectations of 57 in July.
Robust industrial data from European countries provide support for the common currency. The Italy Industrial Output came in at 8.2% beating the forecasts of 5.1% in June, while the Germany Factory Orders came in at -11.9% below the estimates of -34% in June.
Positive sentiment around the GBP builds after the BoE statement. The improvement in BoE forecasts, faster than expected economic recovery, and taking out the negative rates would be positive for GBP in the upcoming sessions.
EURGBP Price Analysis
EURGBP is 0.52% lower at 0.8998, as pound gets a hand from the BoE decision and statement. The pair breaks today below the 50-day moving average and opens the way for lower levels.
First support for the pair is at 0.8990 today’s low. The critical support stands at 0.8929 the 100-day moving average. A break below would accelerate the correction towards 0.8809 the low from May 13.
On the other hand, the first hurdle for the pair stands at 0.9013 the 50-day moving average. Above that, the next resistance awaits at 0.9068 the top from August 5. The next supply zone for GBPUSD would be met at 0.9158 the high from July 27.
EURGBP Daily Chart