Euro climbs as Sterling slips on cautious BoE hold

• EUR/GBP has pushed toward the 0.8600 barrier, reaching multi-day highs as the Pound (GBP) weakens.
• The BoE held the interest rate at 3.75% in a 6-3 vote, its sixth hold in a row, with three members again pushing for a hike.
• Despite warning that inflation risks are tilted higher, the majority signaled no rush to act.

EUR/GBP is trading higher on Thursday, climbing toward the 0.8600 barrier and touching its highest in several days. The Pound has slipped across the board after the Bank of England (BoE) held interest rates and struck a more cautious tone than much of the market had priced in.

The BoE kept the Bank Rate at 3.75%, its sixth consecutive hold, in a 6-3 vote. The three dissenters, the same members as in July, wanted an immediate quarter-point rise to 4.00%. UK inflation is running at 3.1%, well above the 2% target and at a five-month high, and the Bank said price risks are tilted further to the upside, warning that a hike is becoming more likely.

Governor Andrew Bailey pointed to energy price swings from the Middle East conflict, warning that "the longer this volatility persists, the bigger the impact it will have". However, Bailey stressed the central bank's job is to keep any rise in inflation temporary.

Attention now turns to UK Retail Sales for August, the next release on the calendar, with forecasts pointing to another small drop for the month. Beyond that, the BoE does not meet again until November, when fresh forecasts arrive and the case for a hike gets properly tested. Until then, EUR/GBP is likely to take its cue from whether the market keeps trimming its bets on BoE tightening.

Technical analysis:

In the four-hour chart, EUR/GBP trades at 0.8597, keeping a moderately bullish tone as the pair holds above both the 100-period Simple Moving Average (SMA) at 0.8578 and the 20-period SMA at 0.8569. The cross is also supported by nearby horizontal demand at 0.8593, while the Relative Strength Index (14) at 65 suggests firm but not yet extreme buying pressure, hinting that bulls still have room to probe higher levels.

On the topside, immediate resistance is seen at the horizontal barrier around 0.8603, followed by a stronger cap at 0.8607, where a break would likely extend the current advance. On the downside, initial support aligns with the 0.8593 level, ahead of a secondary floor at 0.8581, while deeper pullbacks would look toward the 100-period SMA at 0.8578 and then the 20-period SMA at 0.8569 as more substantial bullish checkpoints.

(The technical analysis of this story was written with the help of an AI tool. Know more.)