Selling EUR/GBP Below the 20 SMA, Ahead of the BOE Meeting

EUR/GBP has been quite bearish recently, as the BOE has already has hiked interest rates many time and we decided to sell this pair again

Written by: Skerdian Meta • Thursday, August 4, 2022 • 2 min read

• Last updated: Thursday, August 4, 2022

EUR/GBP has been bearish since the beginning of July, as Euro weakness increased on deteriorating consumer and investor sentiment in the Eurozone. Moving averages were acting as support at the bottom, but they have turned into resistance and the 20 SMA (gray) has taken over recently, indicating decent selling pressure on this pair. We decided to open a sell forex signal here below this moving average, during the retrace higher yesterday ahead of the Bank of England meeting today.

The Bank of England meets in a while and expectations are 100% for a 25 bps hike and 845% for a 50 bps rate hike. In the last meeting, the Bank of England hiked rates by 25 bps to 1.25% for the fifth time in a row, in a move that was widely anticipated.

The UK headline inflation is expected to move into double digits and growth is expected to turn negative in 2023. This stagflationary environment has been weighing on the GBP for some time, but the Euro is in a worse position. Nonetheless, the GBP tumbled lower as the BOE outlook was negative, which sent EUR/GBP jumping higher.

EUR/GBP H4 Chart – MAs Have Turned Into Resistance

The 20 SMA is pushing EUR/GBP lower

Bank of England Monetary Policy Decision – 4 August 2022

BOE raises bank rate by 50 bps to 1.75%, as expected
June BOE rates were 1.25%
Bank rate 9-0* vote vs 9-0 expected (*Tenreyro voted to raise rates by 0.25%)
Labour market remains tight, domestic cost and price pressures elevated
Estimates Q2 GDP to fall by 0.2% (June forecast was -0.3%)
Sees Q3 GDP increasing by 0.4%
Risks surrounding projections are exceptionally large at present
Inflationary pressures are nevertheless expected to dissipate over time
But there is a risk that a longer period of externally generated price inflation will lead to more enduring domestic price and wage pressures
The policy is not on a pre-set path (leaving options to slow down with rate hikes)
BOE will be particularly alert to indications of more persistent inflationary pressures, and will if necessary act forcefully in response
Full statement

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Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.