In response to comments by BoE’s Saunders, the EUR/GBP experienced a remarkable intraday turnaround.
Saunders raised the prospect of an earlier rate hike, which boosted the value of the pound.
Sustained weakness below the 0.8500 level will pave the way for a further decline.
In response to hawkish comments by BoE policymaker Michael Saunders, the EUR/GBP cross saw some aggressive selling and fell to new daily lows around 0.8515.
The cross built on the previous day’s robust recovery from nearly three-month lows, gaining strong follow-through traction in the first part of Thursday’s trading session. The EUR/GBP cross reached new weekly highs during the early European session, but there was no follow-through, instead being met with strong supply at the 0.8565-70 zone.
After Bank of England policymaker Michael Saunders raised the potential of an earlier rate hike, the British pound saw a spectacular intraday turnaround. During a scheduled address at an online event, Saunders stated that the subject of whether or not to scale back our current asset acquisition program will be discussed at our upcoming meetings.
Curtailing QE (stopping it in the next month or two) and/or more policy action next year are two alternatives for removing stimulus, according to Saunders. Furthermore, he stated that activity appears to have rebounded a little faster than predicted in May, and that there is a chance that the output gap will close sooner than expected.
This follows a hotter-than-expected UK CPI report on Wednesday and mainly positive UK monthly employment data issued earlier this Thursday. The events reinforced speculation that the Bank of England will consider reducing its massive stimulus program sooner, forcing investors to cover their short positions in sterling.
The EUR/GBP cross has slipped again closer to multi-month lows support, just ahead of the important 0.8500 psychological mark, after a dramatic intraday decline of over 50 pips. For short-term traders, the indicated level should now operate as a critical pivotal point, which if strongly broken will pave the way for a continuation of the current downward trend./n
