EUR/GBP: Decisive Break Lower on the Cards as Haldane Signals Shift of Intent at the Bank of England

• Pound to Euro exchange rate today: 1.1348, unchanged on the day's open
• Euro to Pound Sterling exchange rate today: 0.8813

Pound Sterling jumped and the FTSE dropped after the Bank of England’s chief economist and Monetary Policy Committee member said he’s ready to vote for an increase in interest rates "relatively soon".

“I think that the balance of risks associated with tightening 'too early', on the one hand, and 'too late', on the other, has swung materially towards the latter in the past six to nine months," said Andy Haldane in a speech delivered to an audience in Bradford.

The speech contrasts to that delivered by Bank of England Governor Mark Carney a little over 24 hours earlier in which he suggested now is not the time to raise rates.

“Forget the Queen’s Speech, it was all about Andy Haldane,” says Fawad Razaqzada at Forex.com. “This came as a major surprise because Mr Haldane has long been a known dove.”

Razaqzada says Carney is fast losing support on his dovish stance which could be positive for the Pound longer-term.

Haldane noted “a partial withdrawal of the additional policy insurance the MPC put in place last year would be prudent relatively soon.”

Furthermore, the UK economy continued to perform well despite Brexit uncertainty while business investment was picking up pace once more.

With the BoE turning hawkish, and ECB remaining dovish, Razaqzada says there is the risk that the Pound to Euro exchange rate could rise in the coming days and weeks.

Technicals Give Clues as to Where the Exchange Rate Could go Next

Razaqzada notes that the EUR/GBP has actually respected its long-term resistance in the 0.8860-85 range, an area which was formerly support.

Note that for GBP/EUR purposes we spin the levels around, so support becomes resistance and vice versa.

“But so far we haven’t seen a breakdown in market structure. Once a key support area such as 0.8720-40 breaks, then we may see a more decisive move southbound,” says Razaqzada.

Again, for GBP/EUR watchers, look out for a break of 1.1468- 1.1441 for clues that the Pound is picking up strength.

Until that happens, the Forex.com analyst says one has to be wary of the possibility for a rebound in the Euro which has enjoyed an advantage over Sterling of late.

"Recent pullbacks held over 0.8730/20 trend support, but has left us in a range between there and the 0.8850-0.8900 range highs," says analyst Robin Wilkin at Lloyds Bank.

A decline through that support and then 0.8685 would add confirmation that the range highs have held and we can gravitate back towards the 0.8400-0.8250 range lows says Wilkin.

Until then, the analyst is of the opinion that the current sideways action risks a re-test of the range highs, with a break opening 0.9000 and 0.9175 resistance above.