GBP Weakens Against EUR After BoE Holds Interest Rates

The British Pound (GBP) has weakened against the Euro (EUR) following the Bank of England's (BoE) decision to hold interest rates. According to FX strategist Howard Du at TD Securities, this was in-line with their previous view that a more hawkish signal from the BoE would be priced-in by markets.

The market had been expecting a rate hike, but the lack of a materially hawkish shift in the BoE's guidance or vote split was seen as a disappointment. As a result, the GBP knee-jerk weakened after the decision.

Du reiterates their bullish EUR/GBP view and expects a breakout above 0.86 in the coming weeks. They attribute this to UK fiscal and political risk premiums rebuilding ahead of the Autumn Budget, as well as the BoE's guidance being less hawkish compared to the European Central Bank (ECB).