Pound weakens as BoE looms, holds near 0.8800

EUR/GBP trades around 0.8800 on Tuesday at the time of writing, up 0.40% on the day, supported by Pound Sterling (GBP) weakness ahead of Thursday’s Bank of England (BoE) policy meeting. Markets widely expect the BoE to keep its benchmark rate at 4.0%, although one in three investors still anticipates a quarter-point cut following softer inflation data, according to Reuters.

UK Chancellor Rachel Reeves warned that “inflation has been too slow to come down”, adding that her upcoming budget will aim to bring it under control. On the Euro (EUR) side, European Central Bank (ECB) President Christine Lagarde is due to speak later in the day, with no new guidance expected on monetary policy.

Investors remain cautious amid political tensions in France after lawmakers rejected a wealth tax, but focus stays on the BoE as the main short-term driver for the pair.

EUR/GBP Technical Analysis: Short-term uptrend holds under 0.8818 resistance level

EUR/GBP 4-hour chart. Source: FXStreet

From a technical perspective, after failing to break above the 0.8818 resistance level, the EUR/GBP pair pulled back and slipped below an ascending support line on the 4-hour chart above, which now acts as resistance near 0.8805. A recovery above this line could lead to a retest of 0.8818, while a clear break higher would unlock fresh bullish potential.

On the downside, initial support is seen at 0.8790. A drop below this level could expose recent lows around 0.8763, with further weakness targeting the 100-period Simple Moving Average (SMA) near 0.8730. Despite the pause below resistance, the upward-sloping SMA and a Relative Strength Index (RSI) around 61 still point to a short-term bullish bias.

Zooming out, the weekly chart below shows that EUR/GBP has been trading within a broad range between 0.8200 and 0.9300 regions since mid-2016. After rebounding from the lower bound in February, the pair is now consolidating near the midpoint of this range, supported by a long-term ascending trendline. Continued momentum could pave the way for a medium-term move toward the upper bound around 0.9300, although the weekly RSI nearing 70 warns of possible consolidation or a pullback.

EUR/GBP weekly chart. Source: FXStreet