EURGBP’s rally from 0.8600 stalls right below 0.8740

• The euro consolidates above 0.8710 after rallying from the 0.8600 area.
• The pound sells off after BoE's dovish hike.
• EURGBP expected to move lower in the long-term – Danske Bank.

The euro is taking a breather right below 0.8740 following a nearly 1.3%  rally against a vulnerable GBP on Thursday. The pair bounced up from session lows at 0.8600, to consolidate between 0.8710 and 0.8735 at the moment of writing.

BoE’s dovish hike sends the pound tumbling

The sterling has dropped across the board following the Bank of England’s dovish comments in the press conference that followed November’s monetary policy decision.

The Bank of England has hiked rates by 75 basis points, with two committee members voting for a softer hike. Beyond that, they signaled to a softer tightening pace over the next months, which has triggered a broad-based pound sell-off.

BoE President, Andrew Bailey has depicted a bleak economic outlook in the press release following the bank's decision, warning that the country might have already entered a recession that could last two years and cause a 2.9% economic contraction.

EURGBP expected to depreciate in the long-term – Danske Bank

FX analysts at Danske Bank see the pair picking up in the short term, to depreciating in the longer term: “We see a case for EURGBP to remain elevated in the near-term, but in the longer-term expect the cross to move lower as a global growth slowdown and the relative appeal of UK assets to investors are positive for GBP relative to EUR.

Technical levels to watch