The Bank of England opted for a more dovish than expected communication. Despite keeping its guidance unchanged (rates to be restrictive for an extended period of time), the two most hawkish members changed their vote from a hike to a hold, and there was a mention in the minutes that rates can still be restrictive even with rate cuts.

All this isn’t hugely surprising, after all the real policy rate has continued to inch higher with inflation declining. Still, markets are largely reading this as an acknowledgement that cuts aren’t too far away, and are now increasingly convinced the BoE will start easing in June (20 bps priced in), along with starting to speculate on a May move (7 bps priced in).

EUR/GBP may struggle to find much more support above 0.8600 as UK data still has to validate the recent repricing of the Sonia curve.