BoE Heightened Expectations
The Bank of England has increased interest rates for five times in a row, having started all the way back in December, but has been limited to no more than 0.25% adjustments, despite some officials voting in favor of bigger hikes.
The central bank however may be ready to break with convention on Thursday's meeting, by opting for a more aggressive 50 basis points increase, which would be the largest since 1995 - if it materializes. Market expectations have moved towards such an outcome after governor Bailey said a few weeks back that an 0.5% hike would be "among the choices on the table". 
He did warn though that this is "not locked in" and the BoE's track record, in regards to guidance, is far from stellar. It has miscommunicated its intentions in the recent past, wrong-footing markets, with last year's lift-off timing, being probably the best example.
Even if it does hike by 50 bps, this is not something that looks sustainable and a slowdown in the pace of tightening could ensue, given recession fears.
The European Central Bank hiked rates in July for the first time in more than ten years, following its major counterparts with a notable delay. However, it did so emphatically, since it raised them by 50 basis points, which was more than what it had previously communicated.
Despite the hawkish move, Ms Lagarde was rather vague around the intentions of policy makers in regards to the next meeting in September, noting that previous forward guidance is "no longer applicable". 
Sky high inflation puts pressure on the ECB for more aggressive tightening, while fears of economic downturn maybe over-stretched, since the Euro Area grew by a healthy 4% in Q2, according to last week's preliminary data.
Given this and recent comments form various officials, another 0.5% increase does not seem outlandish at this stage, although the next meeting is a month away, which is a large amount of time.
The ECB's outsized July lift-off did not do much to help the pair, since doubts over the next move and rising expectations around the Bank of England, caused a plunge in July.
The next leg of the move will likely be determined by tomorrow's BoE decision and forward guidance, while the broader trajectory from the monetary policy differential between the two banks. We also expect the updated economic projections and caution is needed, especially given the BoE's poor communication skills.
EUR/GBP comes from its worst month in three years and the technical landscape has deteriorated significantly. Looking at the Daily chart, it has rejected the crucial 38.2% Fibonacci of the 2020 High/2022 Low drop and is now on the verge of forming a Death Cross, the EMA50 crossing below the EMA200.
We don't know if this will materialize indeed, but the last time it had occurred was in the 2021-2022 downtrend. Given the above factors, fresh multi-year lows (0.8202) would not come as a surprise. On the other hand, the Relative Strength index approaches oversold territory, which could help the Euro stage a recovery.
Looking at the H4 chart, the recent plunge has brought 0.8247 in the spotlight, but a strong catalyst will be required for a breach, while sustained sub-0.8200 weakness does not look easy for now.
On the other hand, if the BoE does not deliver, then EUR/GBP could find the opportunity to rebound, but the region above the EMA200 (0.8480) poses significant roadblock which contain the daily Ichimoku Cloud and the descending trendline form this year's high.
Senior Market Specialist
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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