The EUR/GBP pair jumped to a multi-weekly high following yesterday’s decision by the Bank of England to leave interest rates unchanged. The pair is now trading at 0.8812, which is the latest level since March.
Yesterday, the BOE completed its meeting and left interest rates unchanged at 0.50%. This unanimous move was expected but the officials’ dovishness was not. In a statement, Governor Mark Carney announced that the bank would likely have one hike this year and two more in 2019. Earlier in the year, traders – guided by a statement by the governor – were expecting two more hikes this year and three more in 2019.
The situation with the Bank of England is understandable. Recent data has not been supportive of increased interest rates. Just a few weeks ago, data from the Office of National Statistics (ONS) showed that the inflation growth was at the lowest level since March last year. Equally, data on manufacturing and service industry has been disappointing.
At the same time, the country is at crossroads about how to deal with Brexit. Recently, the biggest issue has been on how to deal with the customs union. This issue has threatened to break Theresa May’s cabinet. Just two days ago, the foreign minister called her plan crazy.
The pair may continue moving up, and possibly test the 0.8900 level.