EUR/GBP headed for a test of 100-d SMA at 0.8941, eyes 0.90 territory

• BoE dovish hike sends EUR/GBP through the roof.
• EUR/GBP headed to a test of 61. 8% Fibonacci retracement at 0.9093?

The Bank of England raised the interest rates by 25bp from 0.25% to 0.50% with the vote count 7-2 (Sir David Ramsden and Sir Jon Cunliffe dissented).

GBP/USD in free-fall in BoE rate hike aftermath, target 1.2995 level and 2016-2017 uptrend line?

EUR/GBP initially went offered on the outcome, probably due to the vote count considering the consensus was actually at a 6-3 vote count. 

However, the hike was digested as more dovish than anticipated on a more neutral outcome. As a result, UK yields declined 6-9bp across the 2-10Y curve and EUR/GBP rallied onto the 0.89 handle to a high of 0.8937 so far. 

Dovish market reaction to first BoE hike in a decade - Westpac

The move from the BoE was essentially taking back the emergency cut from August 2016 just after the Brexit vote and it seems that the BoE will now be on hold for the foreseeable future while they will ‘monitor closely’ incoming data ‘including the impact of today’s increase in Bank Rate’.

EUR/GBP levels

With a move targetting back to the 100-d SMA at 0.8941, a break for the 0.90 handle opens 0.9026/34 where the 61. 8% Fibonacci retracement at 0.9093 sits along with the mid-August high at 0.9145. 0.9306 is the 28th Aug and year 2017 high. To the downside, the 200-D SMA at 0.8760 and low 0.8732 are the key supports.