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EUR/GBP extended rally

FXstreet.com (London) - The EUR/GBP extended its rally yesterday and has maintained above the breakout point of 0.8500.

The pair had cleared the falling wedge and bullish reversal pattern while the move became exuberated with the release of a dovish set of BoE minutes and poor UK retail sales. Retail Sales came in at +0.5% in April vrs +2.0% - not a good result for sterling.

BoE said today that six members of the Monetary Policy Committee voted to keep quantitative easing at 375 billion pounds ($568 billion) this month. King, Miles and Fisher stuck to a campaign to increase stimulus by 25 billion pounds. According to the minutes, “There was tentative evidence that measures of medium-term inflation expectations were becoming more sensitive to short-term news in inflation…Financial markets were not expecting further asset purchases at this meeting and might, at the margin, reassess the committee’s tolerance of elevated inflation should additional stimulus be injected.”

The quote has opened in the European session ahead of UK second reading of Q1 GDP. So far, the market hasn’t seen anything that would point to any revisions from the +0.3% initial estimate. The pair is oscillating on the pivot point and between 0.8531/53 after reaching as high as 0.8592 in yesterday’s markets. The upside target could be at 0.8635 as a swing high established in March which the pair could recover to. Support zones are 0.8525, 0.8510 and 0.8475.

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