• EUR/GBP recovery from 0,8550 area was rejected on Wednesday at 0.8570.
• The BoE is widely expected to leave rates on hold on Thursday, with three policymakers voting for a rate hike.
• Deutsche Bank warns that the BoE’s “wait and see” stance might weigh on the Pound.

The Euro (EUR) ticks lower against the British Pound (GBP) on Thursday, with investors awaiting the Bank of England’s (BoE) monetary policy decision, due later in the day. The EUR/GBP pair hovers just above 0.8560 at the European session opening times, as the previous two days’ recovery attempt from the 0.8550 area found sellers at 0.8580.

The BoE is expected to leave its benchmark interest rate unchanged at 3.75% amid a split monetary policy committee. Governor Bailey will not speak after the event this time; thus, investors will have to look at the number of hawkish votes to assess the chances of a rate hike in coming months. In July, three policy members voted to hike rates by 25 basis points, and the market anticipates an identical vote split at September’s meeting.

Looking ahead, Deutsche Bank strategists suggest that the Bank of England’s recent tactic of pushing back against early market tightening expectations may be losing effectiveness. A “6-3 vote to hold, and largely unchanged forward guidance – as our economists expect – is now unlikely to be sufficient in preventing some sterling weakness.”, says Deutsche Bank in a note observing that “sterling’s carry advantage against the euro is starting to narrow as the ECB tightens, and has peaked even after adjusting for the fall in implied volume.”

Technical Analysis: Euro treads water halfway through recent ranges

The technical picture shows the EUR/GBP at 0.8569, halfway through the last two weeks’ trading range, with momentum indicators showing a lack of clear bias. The 4-hour Relative Strength Index (14) stays close to the midline, hinting at balanced momentum, while the Moving Average Convergence Divergence (MACD) is just above zero in the same timeframe, suggesting marginal bullish pressure, not strong enough to clear nearby overhead levels.

Bulls are struggling to confirm above a previous support area around 0.8570 (September 8 low), which is closing their path towards the top of the recent range, at the 0.8600 area. On the downside, the area between 0.8546 and 0.8552 (August 26, September 15 lows) is likely to provide support ahead of the August trough, at 0.8531.