EUR/GBP tests the upside break of consolidation around 0.8370, BOE policy in focus

• EUR/GBP has given an upside break of the consolidation formed in a 0.8364-0.8374 range.
• The BOE is likely to sound less hawkish on subdued economic indicators.
• A preliminary estimate for the Eurozone Retail Sales is -1.7% vs. 0.2% in the prior release.

The EUR/GBP pair is testing the upside break of the consolidation formed in a range of 0.8364-0.8374 in early Tokyo. On a broader note, the shared currency bulls have defended a reclaim of a three-month low of around 0.8350. The pre-anxiety period ahead of the interest rate decision by the Bank of England (BOE) will result in wild swings in the counter.

An interest rate policy by the BOE on Thursday is likely to conclude with an outcome of an interest rate hike by 25 basis points (bps). A quarter-to-a-percent rate hike decision by BOE Governor Andrew Bailey will lift the interest rates to 1.5%.

It is worth noting the price pressures are highest in the pound area and the BOE has turned slow in announcing interest rate hikes. Also, the BOE is the first central bank that increased its rates for the first time after the pandemic.

The inflation rate in the sterling zone has climbed to 9.4% and further acceleration to a two-digit figure is imminent as price pressures have not displayed any signs of exhaustion yet.

On the eurozone front, the Retail Sales data is in focus. A preliminary estimate for the Eurozone Retail Sales is -1.7%, extremely lower than the prior release of 0.2%. Investors must be aware of the fact that households in Europe are facing the headwinds of higher price pressures, which are forcing them to higher payouts despite a minor change in quantity purchased. Therefore, the Retail Sales data should be higher. And, a lower estimate for the economic demand indicates a serious fall in the retail demand.