Reaction at Local Support Renews Bullish Sentiment

Summary:

The MACD presents a shallow bullish histogram, but the signal lines are actively crossing into the positive zone; as the histogram begins to build depth, the path of least resistance remains tilted to the upside.

Buy EURGBP

EXP

Trading

0.85712

ENTRY

0.86200

TGT

0.84900

0.85554 -0.00148 -0.17%

Point

Flat

0.84900

CLOSING

0.85712

ENTRY

0.86200

TGT

The Bank of England (BoE) held the Bank Rate unchanged at 3.75% during its latest monetary policy meeting, even as inflation continues to run above the 2% target. A majority of the Monetary Policy Committee expressed that the tightening in financial conditions observed since the outbreak of the Middle East conflict is helping contain inflationary risks tied to rising energy prices.

Looking ahead to coming months, market consensus maintains that the BoE will keep borrowing costs steady. However, investors continue to price in a degree of probability for an additional rate hike before year-end, particularly if inflation pressures show greater persistence.

July inflation metrics came in largely aligned with expectations. The headline Consumer Price Index (CPI) accelerated to 2.9% year-over-year from 2.6% in June, matching market forecasts. This uptick was primarily driven by a 13% increase in Ofgem's regulated energy price cap effective July 1.

Meanwhile, core inflation printed at 2.6% year-over-year, edging slightly above the 2.5% market consensus and remaining unchanged from the prior month. In contrast, services inflation moderated to 3.4% year-over-year from 3.6% previously, matching expectations and offering a sign of relief regarding some of the UK economy's more persistent price pressures.

Meanwhile, minutes from the European Central Bank’s (ECB) monetary policy meeting held on July 22–23 reveal that the institution keeps the door open to further monetary tightening, despite deciding unanimously to leave interest rates unchanged. Governing Council members noted that at least one additional rate hike will likely be required unless the inflation outlook improves substantially, though they avoided committing to a specific decision for September.

The document highlights that moderating inflation justified a temporary pause in July. Eurozone headline inflation fell to 2.8% year-over-year in June from 3.2% in May, while core inflation eased to 2.4% from 2.6%. Furthermore, persistent underlying price pressures continued to show signs of slowing, evolving more favorably than expected.

However, ECB policymakers still view energy prices as one of the primary risks to price stability. The minutes warn that the full impact of the recent increase in energy costs has not yet passed through to the economy, and that prolonged elevated levels could trigger indirect and second-round inflationary effects.

Risk factors identified include high natural gas prices, European gas storage levels below seasonal averages, and ongoing geopolitical tensions affecting energy supply chains. As a result, the Governing Council continues to view inflation risks as predominantly tilted to the upside.

This outlook remains reflected in market expectations, which currently price in nearly a 96% probability of a 25 basis point rate hike by the ECB at its September meeting, according to estimates tracked by the ECB Watch tool. Reaction at Local Support Renews Bullish Sentiment_1

Reaction at Local Support Renews Bullish Sentiment_1

Technical Analysis

EURGBP has displayed a bullish rejection after touching the 0.8453 level on July 15, subsequently entering a consolidation phase that has begun finding support near 0.8535. Having reacted higher from this level once again, we could see a renewed upward push toward 0.8618—a key resistance area positioned near a descending trendline, which aligns with the 100-period and 200-period moving averages at 0.8607 and 0.8655, respectively, acting as a magnet to pull price toward this zone.

Turning to the oscillators, the RSI sits at 55, crossing into bullish territory with sufficient room to extend its upward trajectory. Meanwhile, the MACD presents a shallow bullish histogram, but the signal lines are actively crossing into the positive zone; as the histogram begins to build depth, the path of least resistance remains tilted to the upside.

Trading Recommendations

Trading direction: Buy

Entry price: 0.8570

Target price: 0.8620

Stop loss: 0.8490

Validity: Sep 07, 2026 15:00:00

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