EUR/GBP steadies near 0.8625 in Friday’s early European session.
The European Central Bank kept interest rates on hold at its April meeting.
The Bank of England left interest rates unchanged at 3.75% on Thursday.
The EUR/GBP cross holds steady around 0.8625 during the early European session on Friday. The European Central Bank (ECB) and the Bank of England (BoE) warned they may need to raise interest rates in the coming months, as central banks grapple with the energy shock triggered by the war in the Middle East.
The ECB governing council opted to hold its benchmark deposit facility rate at 2% on Thursday. According to the statement, the central bank said the inflation outlook was largely unchanged. “The upside risks to inflation and the downside risks to growth have intensified.”
ECB President Christine Lagarde said the central bank’s governing council had discussed a rate rise this month “at length and in depth” before voting for a hold. However, policymakers would closely monitor the situation and take a data-dependent and meeting-by-meeting approach to determining their monetary policy stance.
On the UK’s front, the Bank of England (BoE) held interest rates at 3.75% as uncertainty over the Iran war continues. BoE Governor Andrew Bailey said if price pressures triggered by the conflict proved to be severe, a “forceful tightening” would be required.
Bailey on Thursday played down fears of near-term rate hikes but added: “We’ll continue to monitor the situation and its impact on the UK economy very closely.”
GBP/JPY rises to near 214.00 as the Japanese Yen surrenders some gains driven by Japan’s intervention.
Tokyo CPI ex. Fresh Food growth cooled down to 1.5% YoY in April.
BoE’s Bailey clarifies that the central bank will act if it finds there might be second-round effects of inflation.
The GBP/JPY pair is up 0.35% at around 214.00 during the Asian trading session on Friday. The pair trades higher as the Japanese Yen (JPY) surrenders a majority of its Thursday’s gains, which were driven by Japan’s intervention in forex markets to counter one-way speculative moves against the domestic currency.
Japanese Yen Price Today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the weakest against the US Dollar.
USD
EUR
GBP
JPY
CAD
AUD
NZD
CHF
USD
0.02%
0.03%
0.35%
0.00%
0.13%
0.22%
0.03%
EUR
-0.02%
0.00%
0.31%
-0.04%
0.11%
0.18%
0.00%
GBP
-0.03%
-0.00%
0.30%
-0.03%
0.09%
0.17%
0.02%
JPY
-0.35%
-0.31%
-0.30%
-0.33%
-0.22%
-0.16%
-0.31%
CAD
-0.01%
0.04%
0.03%
0.33%
0.11%
0.20%
0.04%
AUD
-0.13%
-0.11%
-0.09%
0.22%
-0.11%
0.08%
-0.06%
NZD
-0.22%
-0.18%
-0.17%
0.16%
-0.20%
-0.08%
-0.15%
CHF
-0.03%
-0.00%
-0.02%
0.31%
-0.04%
0.06%
0.15%
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
According to a report from Reuters, Japan intervened to prop up the JPY against the US Dollar (USD) on Thursday, its first official currency action in nearly two years.
Japan Finance Minister (FM) Satsuki Katayama also said on Thursday that they are moving closer to taking decisive action in the foreign exchange markets.
Meanwhile, Tokyo’s Consumer Price Index (CPI) ex. Fresh Food data for April has come in lower than expected. The underlying inflation growth cooled down to 1.5% Year-on-Year (YoY) from 1.7% in March, while it was expected to arrive higher at 1.8%.
In the Asian trade, the Pound Sterling (GBP) trades higher against its major currency peers, except the Canadian Dollar (CAD), as the Bank of England (BoE) has opened the room for an interest rate hike if the energy supply shock continues to persist.
On Thursday, the BoE left interest rates unchanged at 3.75%, as expected, and Governor Andrew Bailey warned that second-round effects of energy crisis-led inflation could arise, but the central bank would not wait and act early. “It would be a mistake to wait to see the second-round effects before acting because then it would be too late,” Bailey said in the press conference, Reuters reported.
ING’s James Smith notes that the Bank of England (BoE) kept rates at 3.75% in April but is moving closer to tightening as the Middle East crisis persists. ING now expects a single June rate hike, with UK inflation seen peaking slightly above 4% this year. ING remains sceptical about a persistent inflation surge.
ING shifts to a June hike call
“One month ago, Bank of England Governor Andrew Bailey told us markets were getting ahead of themselves on rate hike pricing. That feels like the underlying message from the April decision, which keeps interest rates at 3.75%. But it’s also clear the Bank is inching closer to a rate hike in June.”
“Governor Bailey characterised the decision not to cut, which is what the Bank was likely to have done pre-war, as in effect a decision to tighten policy.”
“That’s why, after today’s decision, we’re now edging towards a hike in June. It’s certainly not guaranteed, but that’s now narrowly our base case, having previously felt rates would stay on hold through this year.”
“Whether that’s followed by one or even two extra hikes, as markets are currently pricing, we’re less convinced right now. It’s clear the majority of the committee are still sceptical about this turning into a persistent bout of inflation, akin to what we saw in 2022. We strongly agree.”
Bank of England (BoE) Governor Andrew Bailey is addressing a press conference and responding to media questions, explaining the reasons behind the central bank’s decision to hold the benchmark policy rate at 3.75% in an 8-1 vote split following the April monetary policy meeting.
Key takeaways from Bailey’s Press Conference
Monetary policy cannot prevent higher global energy prices from affecting uk economy and inflation.
Where we go from here will depend on size and duration of shock to energy prices.
We now project inflation will rise to a little over 3.5% by end of year.
Initial indirect effects of inflation are likely to be largest for food prices.
The longer the conflict in Middle East lasts, the worse the impact will become.
Size of second round effects is uncertain and will take time to build.
Monetary policy faces a difficult judgement call as cannot wait for conclusive evidence on 2nd round effects.
Under scenarios A and B, necessary interest rate response is largely achieved by not cutting rates as was expected in Feb and without further rate increase.
Prolonged spike in energy prices could lead to higher Bank Rate.
There is a good deal of space available to accommodate inflation pressures by not cutting rates as had been previously expected.
Sheer volatility of energy prices makes it impossible to put probabilities on different scenarios.
It would be a mistake to wait for second round effects before acting, that would be too late.
It will take time before we get a good read on pay as most annual settlements have already been agreed.
I think energy price profile of scenario B is more plausible than scenario A.
We do not hear that rapid return to pre-conflict energy supply conditions is likely
It is an active hold today, not a passive one.
Developing story, please refresh the page for updates.
This section below was published at 11:00 GMT to cover the Bank of England’s policy announcements and the initial market reaction.
The Bank of England (BoE) announced on Thursday that it left the benchmark policy rate unchanged at 3.75%, as widely expected, following the conclusion of the April monetary policy meeting.
The vote showed the expected split on the Monetary Policy Committee (MPC), with one member favoring a 25-basis point (bps) rate hike.
Takeaways from BoE Monetary Policy Summary
BoE Chief Economist Huw Pill voted to increase rates by 0.25 percentage points
Bailey says “reasonable” to hold rates at 3.75% given uk economic situation and uncertainty in Middle East.
CPI likely to be higher this year as effect of higher energy prices passes through.
Bailey says our job is to make sure that inflation gets back to 2% after initial impact of war on energy prices has passed.
BoE says there is a risk of material second-round effects from inflation on wage- and price-setting, policy would need to lean against this.
BoE says weaker economy and labour market and tighter financial conditions will help reduce inflation over time.
BoE Monetary Policy Report highlights
BoE has not updated central economic forecasts, gives new forecasts based on three scenarios for energy prices and inflation persistence.
BoE forecasts 2026 CPI averaging 3.3%-4.5% under different scenarios (Feb central projection: 2.2%).
BoE forecasts 2027 CPI averaging 2.6%-4.8% under different scenarios (Feb central projection: 1.9%).
BoE forecasts 2028 CPI averaging 1.5%-2.9% under different scenarios (Feb central projection: 2.0%).
BoE forecasts for 2027 GDP growth 0.8%-1.0% under different scenarios (Feb central projection 1.5%).
BoE forecasts for 2026 GDP growth 0.7%-0.8% under different scenarios (Feb central projection 0.9%).
BoE says most inflationary scenario “was likely to warrant a forceful tightening of monetary policy”.
BoE projections show inflation peaking at 6.2% in Q1 2027 under most inflationary scenario if rates only rise as markets expect.
Market reaction to BoE policy announcements
The Pound Sterling shows little reaction to the BoE policy announcements, with GBP/USD up 0.34% on the day at 1.3515, as of writing.
Pound Sterling Price Today
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the US Dollar.
USD
EUR
GBP
JPY
CAD
AUD
NZD
CHF
USD
-0.24%
-0.31%
-1.90%
-0.22%
-0.52%
-0.59%
-0.69%
EUR
0.24%
-0.03%
-1.68%
0.02%
-0.27%
-0.32%
-0.42%
GBP
0.31%
0.03%
-1.66%
0.06%
-0.22%
-0.27%
-0.39%
JPY
1.90%
1.68%
1.66%
1.70%
1.41%
1.29%
1.20%
CAD
0.22%
-0.02%
-0.06%
-1.70%
-0.31%
-0.39%
-0.48%
AUD
0.52%
0.27%
0.22%
-1.41%
0.31%
-0.05%
-0.15%
NZD
0.59%
0.32%
0.27%
-1.29%
0.39%
0.05%
-0.10%
CHF
0.69%
0.42%
0.39%
-1.20%
0.48%
0.15%
0.10%
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
The Pound Sterling comes under pressure against its peers after the BoE’s interest rate decision.
The BoE maintains the status quo, leaving interest rates unchanged at 3.75%.
On Wednesday, the Fed held interest rates steady in the range of 3.50%-3.75%.
The Pound Sterling (GBP) faces selling pressure, prima facie, after the Bank of England’s (BoE) monetary policy announcement. As expected, the BoE has left interest rates unchanged at 3.75%, with an 8-1 majority. This is the third straight meeting that the BoE has maintained the status quo.
BoE Chief Economist Huw Pill was the one Monetary Policy Committee (MPC) member who dissented from the hold decision and voted for an interest rate hike. Pill was expected to advocate an interest rate hike, as he stated in an event in the middle of the month, that interest rates should be raised for inflation to return to the central bank’s 2% target.
The BoE needs to make decisions that give “the most insurance” against a repeat of the 2022 inflation shock, Pill argued, warning against a “wait and see approach,” Bloomberg reported.
Meanwhile, the US Dollar (USD) faces intense selling despite growing concerns over the Strait of Hormuz outlook and a hawkish Federal Reserve (Fed) hold.
United States (US) President Donald Trump stated on late Wednesday that Washington’s naval blockade of Iranian sea ports will continue until Iran gives up its nuclear ambitions.
On Wednesday, the Fed left interest rates unchanged at 3.50%-3.75%, however, three members of the rate-setting committee dissented the decision and advocated for a move away from the monetary easing bias.
Going forward, investors will focus on the US preliminary Gross Domestic Product (GDP) data, which will be published at 12:30 GMT. On an annualized basis, the US GDP growth is expected to have remained higher at 2.3% against the previous reading of 0.5%.
H is for hawk The Bank of England will announce its latest policy decision at midday on Thursday. The market is expecting no change in rates from the Bank, and we expect an 8-1 vote split, with one of the noted hawks at the bank voting to increase rates.
The backdrop to this meeting is a deeply uncertain global outlook and the threat of a bigger inflation spike after another surge in the oil price, which has risen to a fresh war-time high on Thursday morning to more than $123 per barrel for Brent, as the blockade in the Strait of Hormuz looks like it will be in place for the long term and as Donald Trump mulls ending the ceasefire with Iran. We expect the BOE to remain as calm and composed as possible considering the backdrop, and to stress the uncertain outlook, however, now that the oil price is rising again and oil supply is likely to remain constrained for the long term, the BOE may find it hard to avoid straying into hawkish territory as it balances growth risks with inflation concerns.
We expect the Bank will stress the need to watch for second round inflation effects, for example wage growth. So far, the survey data does not suggest that firms are likely to raise wages, and the labor market is still soft, even if the unemployment rate fell below 5% in the 3 months to February. The latest DMP survey shows that expectations for wage growth this year are unchanged at 3.5%. The Bank may also address the increase in inflation expectations, which rose by 2.1% in March, according to the latest Citi-YouGov survey. This suggests that consumers are concerned about a 2022-style energy price shock, even if the Bank has been keen to stress that the economic backdrop is different this time.
Assessing the chance of a hawkish shock at the BOE
A hawkish shock would be a larger number of MPC members voting for a rate hike, especially since signals coming from the March data have been resilient so far. If we get a 6-3 split, then this could open the door to a June rate hike. That might sound hasty, however, an early hike could nip in the bud any threat of second round inflation effects, especially if the blockade of the Strait of Hormuz lasts for the long term and the oil price stays in triple figures.
What will the BOE do next
Although we do not expect any forward guidance from the BOE at today’s meeting, the market is convinced that the next move from the BOE is a rate hike. There is roughly an 84% chance of two rate hikes from the BOE this year, and the market expects rates to rise to 4.25% to combat the threat of rising inflation caused by the energy price spike. The market is expecting the BOE to signal that rates will remain higher for longer, and for now, UK inflation is expected to peak at 4% this year.
Fed’s hawkish tilt
Today’s BOE meeting follows Wednesday night’s Fed meeting. The Fed did not change policy, but it is worth noting that its policy decision was the most divided since 1992. On the back of the Fed meeting, traders now see a rate hike as more likely than a rate cut for this year, following the Fed’s hawkish hold on Jerome Powell’s last meeting as chair. There is now an 11% chance of a hike from the Fed this year, up from 5% prior to the meeting. The Fed did not change the language used in its statement at this meeting, which suggests that cuts could still be on the cards for US interest rates. However, Powell suggested that this language could be adapted in future if elevated oil prices persist and three Fed governors opposed the current language used in the statement.
The market reacted to the hawkish tone at the Fed. The Dow Jones slumped 250 points, the dollar ticked higher and US stock index futures are also pointing to losses for the S&P 500 on Thursday. We think that the market reaction to the BOE meeting is likely to be mostly felt in the bond market. UK 2-year yields rose by 8 bps on Wednesday, and yields are higher by 26bps in the past month. The 2-year yield is now trading at 4.55%, so a lot of BOE hawkishness is already priced into UK bonds. We think that the oil price is more important for the direction of UK yields and sentiment towards UK assets more generally. UK stocks have slipped behind their US counterparts in recent weeks, and until there is a rotation out of US tech stocks and into defense names like BAE Systems and Rolls Royce, we could see the UK index may continue to struggle.
What is the technical outlook for EURGBP, EURAUD, and AUDUSD?
The Overbalance analysis aims to identify three financial instruments, analyzed primarily on the daily/four-hour (D1/H4) timeframe. The analysis uses only the Overbalance methodology, which helps determine where a trend may continue or where it may reverse. Today’s analysis covers three instruments, evaluated solely in terms of 1:1 correction structures. EURGBP From March 20 through the end of the month, EURGBP traded in an uptrend, but the subsequent correction turned into a stronger downtrend. After the 1:1 upward pattern was negated at the 0.8693 level, the declines accelerated. Currently, the 0.8693–0.8688 zone represents key resistance. Only a return of the price above this zone could shift the balance of power on the chart. For now, the base scenario remains a decline toward the lows at 0.8617.
EURGBP – H4 timeframe. Source: xStation EURAUD From March 11 through the end of the month, the EURAUD pair was in an uptrend; however, the largest corrective pattern was subsequently negated at the 1.6680 level, which was then tested from the opposite side. Since then, we have observed the development of a downtrend. The largest current corrective pattern (marked in red) defines a key resistance level at 1.6470. According to the Overbalance methodology, as long as the price remains below this level, the downtrend remains in effect.
EURAUD – H4 timeframe. Source: xStation AUDUSD Since late March, the AUDUSD pair has been in an uptrend. Recently, the exchange rate has twice tested support at the 0.7015 level, which corresponds to the lower boundary of the 1:1 pattern. As long as this level holds, the uptrend remains intact. It is worth noting, however, that another test of this zone could weaken it, increasing the risk of it being broken and thus triggering a larger downward correction.
EUR/GBP softens to around 0.8660 in Thursday’s early European session.
German Retail Sales fell by 2.0% MoM in March, weaker than expected.
The ECB and BoE interest rate decisions will take center stage later on Thursday.
The EUR/GBP cross declines to near 0.8660 during the early European trading hours on Thursday. The Euro (EUR) weakens against the Pound Sterling (GBP) following the downbeat German Retail Sales data. The preliminary readings of Gross Domestic Product (GDP) from Germany and the Eurozone are due later on Thursday. Also, the European Central Bank (ECB) and the Bank of England (BoE) interest rate decisions will be in the spotlight.
Data released by Destatis on Thursday showed that German Retail Sales, a key measure of consumer spending, fell 2.0% MoM in March. This figure followed a decline of 0.3% in February (revised from -0.6%) and came in weaker than the expectations of a 0.1% decrease.
On an annualized basis, Retail Sales dropped 2.0% in March, versus an estimated rise of 0.5% and the prior release of 0.9% growth (revised from 0.7%). The EUR attracts some sellers in an immediate reaction to the weaker German economic data.
The ECB is widely expected to keep interest rates unchanged at its policy meeting on Thursday due to high uncertainty. Nonetheless, rising inflation, driven by energy price volatility from the Iran war, has raised the expectation of a rate hike in June. Economists predict a quarter-point hike at June’s meeting, and markets now fully price two additional ones after that before the year is out, according to Bloomberg.
The BoE is likely to keep interest rates on hold at its April policy meeting on Thursday as it awaits the economic fallout from the Iran war. Traders will closely monitor the speech from BoE Governor Andrew Bailey for any suggestions that higher borrowing costs are likely to be needed.
“The hikes fully priced into financial markets were already weighing on the economy, reducing the likelihood that the BoE will actually have to raise Bank Rate, at least for now,” said Andrew Wishart, senior UK economist at Berenberg.
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