EURGBP has a rare event on Thursday with the Bank of England and European Central Bank both announcing interest rate decisions.
The two central banks will share their latest policy decisions less than a day after the US Federal Reserve.
EURGBP – Daily Chart
EURGBP traded back toward the 0.87 level but found some support at the daily moving average. The euro is now trying to push higher against the pound sterling with the resistance at 0.90.
The BoE and ECB enter the meetings under different circumstances, whereby eurozone growth comes in better than expected for Q4. At the same time, the IMF has urged the UK to cut taxes. The UK economy will shrink and perform worse than other advanced economies, the International Monetary Fund said. The IMF said the economy will contract by 0.6% in 2023 after the previously predicted slight growth.
However, the IMF said that the UK is now "on the right track," and its Chancellor, Jeremy Hunt, defended the country by saying it outperformed many forecasts last year.
The IMF downgraded its forecast for the UK because of its high energy prices, rising mortgage costs, and higher taxes. IMF chief economist Pierre-Olivier Gourinchas said last year that the UK had "one of the strongest growth numbers in Europe" with a GDP of 4.1%.
Gourinchas said the forecast for this was due to the UK's "high dependence" on expensive liquid natural gas, which had driven up the cost of living. He added that the UK's Autumn Statement showed the country was "certainly trying to carefully navigate these different challenges, and we think that they are on the right track." Figures released yesterday showed a 0.1% growth in the eurozone for Q4 which was better than the -0.1% predicted.
The Bank of England is set to increase its interest rate by 50 bps in February from 3.50% to 4.0% as inflation remains high in the UK above the 10% mark. The ECB is expected to follow suit with its interest rate hike of 50 bps.