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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Chart of the day - EURGBP (02.02.2023)

09:08 2 February 2023

EURGBP is one of major currency pairs that may see some more volatile moves today. This is because the Bank of England and European Central Bank are scheduled to announce monetary policy decisions at 12:00 pm GMT and 1:15 pm GMT, respectively. Both are expected to deliver 50 basis point rate hikes.

While ECB members have been quite vocal about the fact that a 50 basis point rate hike is appropriate for today's meeting, recent cycle pause from BoC and slowdown from Fed raises questions whether ECB will alter its approach. A 50 bp rate move looks like a done deal and should the ECB commit to another 50 bp rate hike in March, EUR may benefit. A 50 bp rate hike and a hint that pace of rate increases will slow going forward would be EUR-negative and may support European stock market indices.

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On the other hand, things look less rosy when it comes to the Bank of England. The UK economy is facing a recession and BoE knows it very well. Higher interest rates are magnifying the so-called "cost of living crisis" in the United Kingdom and while another rate hike could help combat inflation, Bank of England is facing an increasing public backlash over its tightening. Having said that, there is a scope for a dovish surprise with BoE going in with a 25 basis point rate hike.

Taking a look at EURGBP chart at D1 interval, we can see that the pair has managed to climb above the 0.8880 resistance zone today and has even briefly traded at the highest level since late-September 2022. If ECB provides more fuel for the upward move by hinting at another 50 bp rate hike in March, the pair may look towards the 0.8990 swing area that was tested a few times in the 2019-2020 period and marks a local high from late-September 2022. A dovish Bank of England would also support a bullish scenario on the pair.

Source: xStation5

This content has been created by XTB S.A. This service is provided by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, entered in the register of entrepreneurs of the National Court Register (Krajowy Rejestr Sądowy) conducted by District Court for the Capital City of Warsaw, XII Commercial Division of the National Court Register under KRS number 0000217580, REGON number 015803782 and Tax Identification Number (NIP) 527-24-43-955, with the fully paid up share capital in the amount of PLN 5.869.181,75. XTB S.A. conducts brokerage activities on the basis of the license granted by Polish Securities and Exchange Commission on 8th November 2005 No. DDM-M-4021-57-1/2005 and is supervised by Polish Supervision Authority.

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