GBP Struggles Against EUR as BoE Rate Decision Looms
The British Pound (GBP) continues to struggle against the Euro (EUR), extending its losses for another day ahead of the Bank of England's (BoE) interest rate decision on Thursday.
Traders are trimming their exposure to the GBP, which is seen as vulnerable to a dovish BoE repricing according to strategists at Brown Brothers Harriman. The firm notes that market pricing remains aggressive, with 100bps of BoE rate hikes expected over the next twelve months, but cautions that the BoE may not need to tighten as much as markets expect.
Société Générale also warns of a potential sterling wobble ahead of the UK Budget on October 28. The firm's strategists argue that fiscal policy will likely turn more restrictive and notes that UK rates are already 125bp higher than in the Eurozone, reducing urgency for further Bank of England tightening.
From a technical perspective, EUR/GBP is capped by the 100-day SMA at 0.8600, while support lies at the 50-day SMA near 0.8554. A break below this level would expose the psychological 0.8500 mark and potentially send the pair back to its July low around 0.8455.