Snapshot: EUR/GBP is under renewed pressure, testing the 0.8410 level, after the Bank of England held its Bank Rate steady at 3.75% at 12:00 London. This decision underscores the MPC’s caution following the May uptick in core CPI to 2.6%, frustrating sterling bears who expected a dovish tilt after the recent softening in the average earnings index to 4.0%. The policy divergence remains stark, with the ECB having already cut its Deposit Facility Rate to 2.50% as it maintains a mild easing bias.
- The BoE’s decision to maintain rates at 3.75% reinforces sterling’s yield advantage, making the key support level at 0.8380 the immediate target for shorts.
- A potential flare-up in risk aversion during the NY session, reflected in the VIX rising to 18.44, could spur safe-haven dollar demand but is unlikely to derail the sterling-supportive rate backdrop.
Bias into NY: We hold a bearish bias on Euro/Sterling into the New York session, targeting a clean break of 0.8400 down to 0.8380, driven by the BoE’s reluctance to ease while the ECB remains on a clear rate-cutting path.