EUR/GBP drops to fresh four-month lows, keeps challenging 0.8500

• Bank of England keeps monetary policy unchanged, with limited impact on GBP.
• EUR/GBP heads for the lowest close since April.

The EUR/GBP dropped to 0.8490 during the American session reaching the lowest level since early April. It then bounced modestly to the upside, and it is hovering around 0.8500.

The pound continues to be unable to make a clear break under 0.8500. If materialized, a test of the year-to-date low at 0.8471 seems likely. The negative bias remains intact. Any bounce under the 20-day moving average at 0.8545 should be seen as corrective.

Bearish trend continues after BoE

On Thursday, as expected, the Bank of England kept its monetary policy unchanged. There was one dissenter: Michael Sauders, who voted to stop the QE early. The BoE mentioned global inflationary pressures are stronger but transitory.

“The big news is that the Bank of England could begin reducing the amount of government bonds it holds once rates reach 0.5% - so potentially in mid/late 2023. The change in threshold is not too surprising, but the finer details possibly hint at a more rapid unwind than might have been expected,” wrote ING analysts.

Technical levels