Today, the Bank of England (BoE) is set to cut its short-term policy interest rate by 25 basis points to 4%, its lowest level in over two years, based on consensus expectations.
It will be the BoE’s second rate cut this year, as several of its Monetary Policy Committee members were cautious over a sticky inflationary trend that overshadowed growth concerns.
The latest core inflation rate in the UK jumped to 3.7% y/y in June, surpassing May’s print of 3.5%, and market expectations of 3.5%. Since the current inflation print is close to double the central bank’s 2% target, the MPC is expected to leave in place guidance steering markets toward more “gradual and careful” interest-rate cuts and a meeting-by-meeting approach.
Let’s now focus on a short-term technical trading set-up on the EUR/GBP cross ahead of the BoE’s monetary policy decision today.
Fig. 1: EUR/GBP minor trend as of 7 Aug 2025 (Source: TradingView)
Preferred trend bias (1-3 days)
The recent minor corrective decline of 145 pips seen in the EUR/GBP from the 25 July high to the 31 July low is likely to have ended.
A potential bullish impulsive up move sequence is unfolding that supports EUR outperformance over GBP within its medium-term uptrend phase.
Bullish bias with 0.8700/8680 as the key short-term pivotal support for the next intermediate resistances to come in at 0.8740/8770, 0.8800, and 0.8860 (Fibonacci extension and upper boundary of the medium-term ascending channel from 24 February 2025) (see Fig. 1).
Key elements
- The price actions of the EUR/GBP have reintegrated back above its upward sloping 20-day and 50-day moving averages, which suggests the medium-term uptrend phase remains intact.
- Its hourly RSI momentum indicator has continued to exhibit a bullish momentum condition that advocates short-term EUR outperformance over GBP.
- The discount yield spread between the 2-year German Bund and 2-year UK Gilt has narrowed from -2.08% to -1.92% which suggests that short-term sovereign bonds in the UK are getting “less attractive” to own than Germany’s short-term sovereign bonds. A positive driver of further potential upside in EUR/GBP.
Alternative trend bias (1 to 3 days)
A break below 0.8680 negates the bullish tone, where the EUR/GBP may see a minor slide to retest the next intermediate supports of 0.8640 and 0.8610/8600 (31 July 2025 minor swing low and 50-day moving average).