Euro jumps against British Pound as BoE leaves rates on hold

The Euro gained strength against the British Pound on Thursday as the Bank of England (BoE) decided to keep interest rates steady, while many other major central banks increased their monetary policies. The EUR/GBP pair climbed over 20 pips from its daily lows, reaching highs above 0.8580, nearing two-month highs near 0.8600. The BoE maintained its Bank Rate at 3.75%, with three committee members advocating for a quarter-point hike to 4%, similar to the July meeting's split.

BoE Governor Andrew Bailey, who did not speak to the press post-decision, hinted at a potentially hawkish tone in the meeting minutes. He noted the bank might need to tighten monetary policy if the Middle East conflict continues and warned of increasing risks of second-round effects. Despite these comments, the Pound failed to gain support from the Eurozone's Harmonised Index of Consumer Prices (HICP), which revealed accelerating price pressures in August (+0.4% YoY) compared to July (+0.2%), while the year-over-year growth was revised downward to 3.2% from 3.3%.

Core inflation remained unchanged at 0.2% monthly and 2.4% YoY, maintaining pressure on the European Central Bank (ECB) to keep raising interest rates to curb consumer inflation. Analysts at ING foresee the BoE's dovish stance could lead to renewed currency weakness, predicting a weaker sterling against the Dollar and Euro. ING identifies the EUR/GBP pair as their preferred way to capitalize on the GBP's weakness beyond the near term, targeting 0.87 by year-end.