FxWirePro: EUR/GBP tests 200-DMA resistance, pound trades weaker following dovish BoE

EUR/GBP chart - Trading View 

EUR/GBP spikes higher for the second straight session, tests 200-DMA resistance, outlook bullish.

The pair was trading 0.34% higher on the day at 0.8586 at around 10:45 GMT, after closing 0.91% higher in the previous session.

The British pound sold-off across the board following yesterday’s dovish Bank of England (BoE) policy surprise which triggered a sharp repricing of rate hike expectations for the coming years.

Weakness in the pound would continue to build if market participants feel the BoE is falling behind the curve in responding to higher inflation in the UK.

German Industrial Production unexpectedly drops by 1.1% MoM in September, suggesting that the recovery in the manufacturing sector is dwindling.

On an annualized basis, the German industrial production fell by 1.0% in September versus -8.0% expected and a 1.7% growth registered in August.

European Central Bank (ECB) Vice President Luis de Guindos said earlier today that factors behind the recent surge in inflation are of transitory nature.

He added that inflation in eurozone will decline next year, but maybe not as much as expected due to second-round effects. 

Comments do not bode well for the shared currency, but EUR/GBP largely ignores downbeat data and dovish comments, remains buoyed on weak pound.

Technical indicators support upside in the pair. Price action pivotal around 200-DMA, decisive break above will propel the pair higher.