EUR/GBP stabilizes around 0.8940 after BoE volatility

• Bank of England buys gilts to stabilize the bond market.
• Pound strengthens after the initial impact of BoE announcement.
• EUR/GBP unable to hold firm above 0.9000.

The EUR/GBP is hovering around 0.8940 practically flat for the day after moments of extreme volatility following a surprise announcement from the Bank of England. The cross bottomed at 0.8838, the lowest in three days and then jumped to 0.9066, before pulling back. GBP/USD rose from 1.0535 to levels above 1.0900.

The Bank of England announced it will by long-term gilts and delayed the beginning of sales. The collapse in UK bonds forced action from the BoE to avoid more tensions across financial markets. The BoE said it purchased on Wednesday £1.025B of gilts.

The decision was a positive for equity markets and also made bond yields pullback across the globe. Still the situation in the UK is still complex. The blowup in UK bonds and the quick depreciation of the pound also triggered political instability to the new administration of PM Liz Truss. Her tax-cutting plan is being criticized.

Markets continue to digest BoE’s announcement. The current calm will likely be short-lived and EUR/GBP continues to look for the next equilibrium level. So far, that area appears to be under 0.9000. A close above could open the doors to more gains.

Technical levels