EUR/GBP Cautious after the Dull ECB Hold, Turns to the BoE
EUR/GBP Analysis
The European Central Bank kept rates unchanged on Thursday, after ten consecutive increases, worth 400 basis points [1]. The European economy is weak as per Ms Lagarde's own acknowledgement and is indicated by poor PMIs and GDP figures. Germany in particular, the bloc's economic engine, is expected to contract by 0.5% this year according to the International Monetary Fund. [2]
At the same time inflation moderated substantially in September and this allowed policymakers to hold, but price pressures remain elevated and could be exacerbated by the Middle East conflict. Given the uncertain situation, President Lagarde did not offer much in the way of direction, succinctly stating that "now is not the time for forward guidance". She did not shut the door to further tightening though, noting that Thursday's pause "doesn't mean to say that we will never hike again". [1]
The Bank of England finds its self in a similarly difficult spot. Inflation has eased significantly and the economy is in a poor state, pushing it to a hold in September, after 515 basis points of tightening. The 4-5 split decision is telling of the divisions among policymakers, who have long maintained a non-committal stance, creating uncertainty around the next steps. Despite progress, inflation proved sticky in September, keeping further hikes in play.
EUR/GBP was volatile yesterday around the ECB decision, but the dull hold was well telegraphed and not accompanied by any hints as to what's next. Market now turn to the Bank of England that announces its rate decision next Thursday (November 2), which can determine its path.
The pair runs its second profitable month and has broken on the upside, the sideways movement its has been in since the start of the summer. There is a tentative bullish bias, but does not inspire much confidence for gains past 0.8791.
On the other hand, EUR/GBP is subdued today and the ECB's decision had a dovish tilt to it. As such there risk for a breach of the key EMA200 (0.8660-55). Daily closes below it would pause the bullish bias, but we are cautious around sustained weakness, as the downside appears well protected.
Nikos Tzabouras
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. With extensive experience in market analysis and a strong foundation in international relations, he brings a unique perspective to financial markets. Nikos emphasizes not only technical analysis but also on fundamentals and the growing influence of geopolitics on financial trends.
As a Senior Financial Editorial Writer, he delivers comprehensive and forward-looking insights across a wide range of asset classes, including equities, commodities, and currencies. His work explores how macroeconomic events, political developments, and global policies impact market dynamics, providing readers with a deeper understanding of both short-term movements and long-term trends.
References
| Retrieved 26 Oct 2023 https://www.ecb.europa.eu/press/pressconf/2023/html/ecb.is231026~c23b4eb5f0.en.html | |
| Retrieved 10 Apr 2026 https://www.imf.org/en/Publications/WEO/Issues/2023/10/10/world-economic-outlook-october-2023 |
Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.