EUR/GBP stabilizes close to 0.8750 ahead of Bank of England Super Thursday

• The oversold condition on GBP is unwinding ahead of the Bank of England rate decision and Inflation Report press conference due on Thursday.
• GBP can be boosted if the Bank of England signals at least one rate hike in 2018 according to analysts.

The EUR/GBP is trading at around 0.8750 down 0.08% on Wednesday ahead of the Bank of England Super Thursday. 

The bulls failed to bring the cross above the 0.8770 level in the European session and the EUR/GBP is trading close to the 0.8750 mark in the first part of the US session. 

The British pound has been extremely oversold, especially against the US Dollar and the progressive unwinding of the short GBP trade ahead of the Bank of England meeting is pushing EUR/GBP lower.

ING analysts pointed out that there is “an all or nothing sentiment when it comes to further BoE rate hikes (“all” being two or more rate hikes in 2018 versus “nothing” being that the Bank will not hike again).” Indeed the odds of a rate hike in May were very high in April and then dropped below 20% a few weeks later. A middle ground and “a combination of a 7-2 split MPC vote (two rate hike dissenters)” and a downplay of the “the soft first quarter GDP data and a reiteration by Governor Carney that another rate hike this year remains likely” should support GBP, according to Viraj Patel from ING Bank. 

EUR/GBP 4-hour chart 

The cross is sitting at the 200-period simple moving average on the 4-hour chart and traders are debating whether extend the slide to the 0.8680 and 0.8620 swing lows or to retest the resistance at 0.8761 swing low and at 0.8844 cyclical high.