EUR/GBP drops to new 2023 lows near 0.8660 post-BoE

• EUR/GBP accelerates the selling bias to 0.8660.
• The BoE hikes the policy rate by 25 bps to 4.50%.
• The central bank leaves guidance on rates unchanged.

The buying interest around the Sterling gathers further pace and forces EUR/GBP to sink to new YTD lows near 0.8660 on Thursday.

EUR/GBP weaker on hawkish BoE

EUR/GBP maintains the multi-week decline well in place and flirts with the 200-week SMA (0.8691) on the back of the somewhat improved mood around the British pound after the BoE raises its policy rate by 25 bps as expected.

The BoE now sees inflation retreating at a slower pace than that suggested in February, while it leaves the guidance on interest rates intact at the time when it expresses concerns over food inflation and core goods prices. On the latter, the BoE notes that inflation risks are sizably tilted to the upside and the persistence of elevated inflation would require extra tightening.

Moreover, the central bank does not expect the economy to fall back into recession.

In the meantime, and on the euro side of the equation, the solid performance of the Greenback so far keeps the risk complex under pressure and props up the intense sell-off in the single currency, which in turn collaborates with the daily pullback in the cross.

EUR/GBP key levels

The cross is losing 0.36% at 0.8667 and the breakdown of 0.8661 (2023 low May 11) would expose 0.8547 (monthly low December 1 2022) and finally 0.8386 (weekly low August 17 2022). On the other hand, the next up barrier emerges at 0.8734 (200-day SMA) followed by 0.8834 (monthly high May 3) and then 0.8875 (monthly high April 25).