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EUR/GBP spikes to 0.7120 on dovish BOE, QIR

FXStreet (Mumbai) - The cross in the EUR/GBP spiked to fresh session highs above 0.71 barrier, after the pound dropped sharply in response to the dovish BOE minutes and quarterly inflation report (QIR).

EUR/GBP rises from 0.7060 levels

Currently, the EUR/GBP pair gains 0.74% to fresh session highs of 0.7119, bouncing-back firmly on the bids after the BOE events. The cross regained momentum after the British currency slumped nearly 70 pips in a knee-jerk reaction to the outrightly dovish BOE inflation report, which pushed back odds of a BOE rate hike until second half 2016.

The BOE policy decision remained unchanged for the 80th straight month along with the vote-split at 8-1. But it was the dovish inflation report that weighed heavily on the GBP.

The inflation report showed that the policymakers lowered both short and medium-term inflation outlook while noting that lower oil prices and sterling’s recent appreciation is likely to keep price pressures subdued.

Moreover, the renewed buying interest in the EUR/USD pair also boosted further upside in the EUR/GBP cross. Markets will continue to digest the BOE report and look forward to the US employment data due later in the NY session.

EUR/GBP Technical Levels

To the upside, the next resistance is located at 0.7140/55 (10-DMA/ 1h 200-SMA), above which it could extend gains to 0.7200 (round number). To the downside immediate support might be located at 0.7042 (daily low) below that at 0.6981 (June low).

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