Euro Retreats Ahead of BoE Decision

The euro retreated from its four-week high against the British pound on Tuesday as traders grew cautious ahead of the Bank of England's upcoming monetary policy decision.

Expectations of a hold or modest rate adjustment have created a floor for sterling, limiting further gains for the euro. The euro's earlier strength was driven by a weaker dollar and improving sentiment in European equities, but those tailwinds have faded as focus shifts to UK monetary policy.

The EUR/GBP pair had rallied to its highest point in four weeks, testing resistance near the 0.8600 mark. Support is now seen around 0.8550, with a break below that opening the door to the 0.8500 area.