EUR/GBP: Policy Divergence Fuels Bearish Momentum

EURGBP pared some of its gains due to policy divergence between BOE and ECB.Intraday  bias  remains bearish as long as resistance 0.8550 holds. It hits an  intraday low of 0.84716 and is currently trading around 0.84800.

The Bank of England's Monetary Policy Committee has maintained the Bank Rate at 5.25% since January 2024 to meet its 2% inflation target, as well as to stimulate economic growth and employment, though members disagree about tightening or easing. Headline CPI inflation, while falling, is predicted to increase to 3.7% in Q3 2025 before easing, remaining at least above target until Q4 2027, with risks now viewed as more balanced even after wage growth and high services price inflation. The MPC is rolling back its QE asset holdings from £895bn to £623bn by March 2025 via asset sales and maturity, and this speaks to gradual policy tightening while holding to a restrictive policy stance as long as is required to lock in sustainable inflation. The MPC continues to abide by its flexible inflation-targeting regime, operating independence, and openness and is prepared to move on to changing economic information.

Technical Analysis

The pair is currently trading above the 34- and below 55-EMA on the 4-hour chart.

Bearish Trend Confirmation: Any break below 0.8450 confirms an intraday bearish trend. A drop to 0.8378/0.8300 is likely.

Near-Term Resistance:  The near-term resistance is around 0.8550. Any violation above will take the pair to 0.8605/ 0.8660/0.8765/0.8800.

Indicator Analysis (4-hour chart)

• CCI (50): Bearish
   
• Average Directional Movement Index:  Neutral

Trading Recommendation

It is good to sell on rallies around 0.8500 with SL around 0.8550 for a TP of 0.8380.​