EUR/GBP Forecast: Is EUR to GBP Ahead of BoE Decision?

Summary:
• The EUR/GBP price remained unchanged ahead of the upcoming Bank of England (BoE) decision. It was trading at 0.8600

The EUR/GBP price remained unchanged ahead of the upcoming Bank of England (BoE) decision. It was trading at 0.8600, where it has been in the past few days. This price is about 7% below the highest level in September. So, what next for the EUR to GBP price?

BoE interest rate decision

The EUR to GBP price has been in a tight range in the past few days as focus shifts to the BoE interest rate decision. Most economists believe that the bank will continue hiking interest rates as it continues to battle soaring inflation.

Data published last week showed that UK’s consumer inflation jumped to more than 10% in September as the cost of most items rose. And analysts now believe that inflation will keep rising as the new administration removes some of the energy subsidy. 

The BoE decision comes a day after the bank started shrinking its giant hoard of 838 billion stockpile of government bons. It has started its quantitative tightening process in a bid to fend off claims that it is encouraging more government spending. UK government bonds have risen to over 2 trillion pounds. It now aims to sell about 80 billion pounds of bonds by the end of next year.

The EUR/GBP price will react to the latest statement by Christine Lagarde, the head of the European Central Bank (ECB). She will likely talk more about last week’s monetary policy meeting in which the bank decided to hike interest rates by 75 basis points. It also ended its support for European banks.

EUR/GBP forecast

The EUR to GBP price has been in a tight range in the past few days. It was trading at 0.8615 on Thursday morning ahead of the latest BoE decision. It remains slightly below the 25-day moving average while the Relative Strength Index (RSI) has formed a bullish divergence pattern. It has moved below the descending trendline shown in green.

Therefore, the outlook for the pair is neutral ahead of the upcoming BoE decision. If this happens, the next key support level to watch will be at 0.8500. A move above the resistance at 0.8670 will invalidate the bearish view.