The European Central Bank kept rates unchanged on Thursday, after ten consecutive increases, worth 400 basis points . 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. 
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". 
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.
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. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.
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