• Bank of England raises key rate by 25 bps to 4.25%.
• Pound Sterling relatively steady after the decision. 
• EUR/GBP prints fresh daily low at 0.8819, then climbs back to 0.8840. 

The EUR/GBP dropped to 0.8819, hitting a fresh daily low after the Bank of England (BoE) raised interest rates by 25 bps; however, the cross quickly rose back to the 0.8840 area, erasing all losses. 

Bank of England rises as expected 

“At its meeting ending on 22 March 2023, the MPC voted by a majority of 7–2 to increase Bank Rate by 0.25 percentage points, to 4.25%. Two members preferred to maintain Bank Rate at 4%,” the BoE said.  According to the BoE, “CPI inflation increased unexpectedly in the latest release, but it remains likely to fall sharply over the rest of the year.” They added “the extent to which domestic inflationary pressures ease will depend on the evolution of the economy, including the impact of the significant increases in Bank Rate so far. Uncertainties around the financial and economic outlook have risen.”

BOE hikes policy rate by 25 bps to 4.25% in March as expected - LIVE COVERAGE 

Prior to the BoE, EUR/GBP was hovering around 0.8840 after rising sharply during two days in a row, from monthly lows near 0.8700. Hawkish comments from European Central Bank speakers gained credibility over the last sessions as the banking crisis eased. Monetary policy divergence could favor the Euro, but the BoE refrained to mention that it's done with monetary tightening. 

The EUR/GBP is hovering around 0.8840, in negative territory for the day, but holding on to strong weekly gains. Earlier on Thursday it reached at 0.8860, the highest level in ten days. 

Technical levels