The EUR to GBP rate surged higher on Friday, after comments from BOE members about imminent rate cuts, sending the GBP tumbling lower. But, the surge stopped at the 200 SMA (purple) on the daily chart which has been acting as the ultimate resistance and it reversed the price back down again.

EUR/GBP Chart Daily – The 200 SMA Held As Resistance Once Again

The EUR/GBP exchange rate has been declining for several months, but it found support around the 0.85 level earlier this year, which strengthened in March. However, moving averages are still acting as resistance. The 100 SMA (green) which was acting as resistance broke, suggesting a potential end to the downtrend and the beginning of a bullish trend.

Since the end of January, the EUR/GBP pair has been trading in a narrow range of one cent, fluctuating between 0.65 and 0.66. However, on Friday, buyers stepped in and pushed the price above the 100-day Simple Moving Average (SMA), which had been acting as resistance and keeping the highs lower.

Bank of England Contemplating the Start of Rate Cuts

The British pound faced downward pressure following dovish comments from Bank of England policymakers last week, who revised their outlook to anticipate further easing and stability in inflation around the central bank’s target of 2% over the next few years. This led to a continuation of the recent upward momentum for EUR/GBP , with the pair recording its second consecutive day of gains on Monday and reaching its highest level in four and a half months.

Governor of the Bank of England, Andrew Bailey, expressed optimism about declining UK inflation on Wednesday, highlighting differences between the UK and US economic situations. He noted that the latest data aligns closely with the Bank’s projections.

However, BOE’s Pill, in an attempt to manage market expectations, stated yesterday that a rate cut is not imminent and emphasized that the BOE does not necessarily need to synchronize its rate decisions with the Fed or ECB. Despite the BOE’s previous satisfaction with market pricing in August, traders have recently tested this narrative by pricing in a potential rate cut as early as June, with probabilities approaching 50%. This was one of the main reasons for the bearish reversal in EUR/GBP which fell below 0.66 again.

EUR/GBP Live Chart