EUR/GBP rebounds—but can it break free from the Broader Downtrend?

EUR/GBP has regained some ground over the past two trading sessions, but the rebound has yet to deliver a convincing bullish signal. The pair is attempting to form a base, although the daily technical structure remains neutral to bearish as price continues to trade below major resistance.

The latest recovery appears to be driven primarily by short covering rather than a decisive increase in spot demand. That distinction is important: without stronger underlying buying momentum, the pair may struggle to extend its gains—particularly with a major Bank of England policy announcement approaching.

Bank of England Takes Centre Stage

Market attention now shifts to the Bank of England following the Federal Reserve’s decision a day earlier. The BoE is widely expected to leave the bank rate unchanged at 3.75%, but its policy guidance could prove more influential than the decision itself.

Policymakers are likely to retain a hawkish bias as rising energy costs intensify concerns about persistent price pressures. Annual CPI inflation climbed to 3.1% in August, while producer-price inflation also accelerated, complicating the outlook for monetary policy. Higher motor fuel prices, linked to the ongoing Iran conflict, and increased airfares contributed to the acceleration.

A more hawkish-than-expected message could strengthen the pound and place renewed downward pressure on EUR/GBP. Conversely, any indication that policymakers are becoming less concerned about inflation could weaken sterling and support a further rebound in the pair.

Technical Outlook: Recovery, Not Yet a Reversal

From a technical perspective, EUR/GBP remains below its 200-day simple moving average at 0.8645. This keeps the broader trend tilted to the downside despite the recent recovery.

For now, the move higher should be viewed as a correction within an established downtrend rather than the beginning of a confirmed bullish reversal. A sustained break above the 200-day SMA and nearby resistance would be needed to improve the technical outlook.

Until then, EUR/GBP remains vulnerable to renewed selling pressure, with the Bank of England’s decision likely to determine whether the rebound gains traction or begins to fade.

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