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EUR/GBP Rebounds Ahead of BOE

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EUR/GBP Rebounds Ahead of BOE

The EURGBP pair rebounded Monday, as investors set their sights on an active week of trade headlined by the Bank of England’s monthly interest rate decision.

As of 17:30 GMT, the EURGBP was trading at 0.8208, a gain of 33 pips. The pair is currently testing the 0.8204 resistance; a break above this level leads to 0.8225 and 0.8240. On the downside, technical support is ascending at 0.8111, 0.8132 and 0.8152.

The pair lost more than 1.6 percent last week after the Bank of England unexpectedly raised its growth outlook. Acknowledging the UK economy was recovering faster than forecast, the BOE upped its growth outlook from 2.8 percent to 3.4 percent. Target inflation, good credit conditions and an improving labour market are expected to anchor growth in 2014.

Although economic recovery is expected to broaden this year, there remains enough slack in the economy to keep interest rates at record lows, the BOE said last week. The central bank hinted at the second quarter of 2015 as being a “reasonable” time frame to expect a rate hike.

The bank, struggling to manage interest rate expectations after a botched attempt at forward guidance, is expected to vote down a rate hike Wednesday. Stronger than forecast employment growth, however, could place more pressure on the Monetary Policy Committee to consider a rate hike sooner than 2015. The Office for National Statistics will report on January employment figures Wednesday. Economists in a Reuters poll say UK unemployment fell by more than 18,000 in January.

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