EUR/GBP picks up pace and climbs to 3-week highs past 0.8600

• EUR/GBP surpasses the 0.8600 mark and records new tops.
• The BoE surprises markets by hiking 50 bps on Thursday.
• The central bank still sees inflation dropping markedly this year.

EUR/GBP gathers traction and breaks above the 0.8600 yardstick in the wake of the unexpected 50 bps rate hike by the BoE at its event on Thursday.

EUR/GBP keeps the weekly recovery in place

EUR/GBP maintains the bid bias well and sound for the fourth session in a row on Thursday, extending at the same time the bounce off recent 2023 lows near 0.8520 (June 19).

In fact, the cross keeps the current trading range after the BoE caught markets off guard and hiked its policy rate by 50 bps to 5.00% at its gathering on Thursday.

The decision by the central bank to raise rates more than expected seems to have been justified by the sticky and elevated UK inflation figures, particularly following the unexpected uptick in June.

The vote to hike rates was not unanimous, with usual dove members Dhingra and Tenreyro leaning towards keeping rates on hold at 4.50%.

According to the bank’s statement, second-round effects on domestic wages and prices likely to take longer to unwind than they did to emerge, while consumer prices are expected to fall significantly this year, mostly due to energy costs.

EUR/GBP key levels

The cross is gaining 0.25% at 0.8624 and faces the next hurdle at 0.8699 (55-day SMA) followed by 0.8747 (200-day SMA) and then 0.8875 (monthly high April 25). On the other hand, the breakdown of 0.8518 (2023 low June 19) would expose 0.8386 (weekly low August 17 2022) and finally 0.8249 (monthly low April 14 2022).