EUR/GBP sharply lower on Tuesday in its worst trading day since July

• The Euro is steeply off its bids against the Pound Sterling, down 0.5%.
• The GBP took a leg higher after several hawkish comments from BoE policymakers.
• A thin Wednesday calendar gives way to Thursday's double-header EU & UK PMI readings.

The EUR/GBP is down half a percent following a Pound Sterling (GBP) rebound fueled by unexpectedly hawkish comments from Bank of England (BoE) policymakers early Tuesday during the UK's Monetary Policy Report Hearings.

The Euro (EUR) got knocked back towards the 0.8700 handle and is trading into the low end with little recovery heading into Wednesday's market session.

BoE says tighter policy might be needed to combat inflation

Several policymakers from the BoE testified in front of the UK Parliament's Treasury Committee early Tuesday, striking a notably hawkish tone on interest rates as sticky inflation and elevated inflation expectations continue to plague the UK's central bank.

BoE’s Ramsden: I would not rule out having to raise bank rate further in the future

Several BoE policymakers testified before Parliament, and the overall tone was notably hawkish, with the BoE appearing unified in their insistence that ongoing policy tightness will be required to combat ongoing, persistent inflation in the UK. 

BoE’s Mann: Prospects for more persistent inflation imply a need for tighter monetary policy

Policymakers also noted that inflation pressures are expected to increase sometime in 2024, and that too much focus on current headline inflation figures is a mistake.

BoE’s Haskel: Fall in headline CPI not a good guide to inflation trend

Wednesday sees a limited economic calendar outside of EU Consumer Confidence for November, forecast to tick upwards from -17.9 to -17.6.

Investors will be focusing heavily on Thursday's dual Purchasing Managers' Index (PMI) reports, due for both the EU and the UK.

The EU's HCOB Composite PMI for November is expected to see a slight improvement from 46.5 to 46.9, while the UK's S&P Global/CIPS Composite PMI is seen holding steady at 48.7.

The UK's steady reading forecast could come under threat if the Manufacturing component of the PMI fails to tick upwards from 44.8 to 45.0 as markets are currently forecasting.

EUR/GBP Technical Outlook

The Euro's backslide has sent the EUR/GBP tumbling well past the 200-hour Simple Moving Average (SMA) as the pair fumbles recent highs to slump back into familiar low points that have plagued the pair for most of November and October.

On the daily candlesticks the pair is pulling back towards the 200-day SMA, though buyers will be tempted by the 50- and 200-day SMA bullish crossover forming on the charts. Technical support from the crossover zone near 0.8680 could provide lift for the pair, while shortsellers will be targeting the last swing low into 0.8650.

EUR/GBP Hourly Chart

EUR/GBP Daily Chart