Published: 19 December 2025,07:08
Daily Market Analysis New
Key Takeaways:
*A narrow 5–4 vote and guidance that future moves will be a “closer call” signal a slow, data-dependent easing cycle, limiting downside risks for Sterling.
*Lagarde stressed policy is “not static” but in a “good place,” reinforcing a higher-for-longer stance and supporting the euro’s yield advantage.
*While decisions were priced in, the cautious and inflation-aware tone from both central banks provided near-term support for both EUR and GBP.
Market Summary:
Both the European Central Bank and the Bank of England delivered monetary policy decisions in line with market expectations, resulting in minimal immediate volatility as the outcomes were fully priced in. However, the accompanying communications and voting details revealed a notably cautious, even hawkish, undertone from both institutions, providing a constructive foundation for their respective currencies in the near term.
For the Pound Sterling, the BoE’s decision revealed a more divided Committee than some expected. The 5-4 split in favor of a cut underscores significant internal caution, with a substantial minority advocating for no change. This division, coupled with guidance that future policy decisions will be a “closer call” due to persistent inflation risks, signals a very gradual and data-dependent easing cycle. The market perceives this as a hawkish tilt relative to prior expectations for a more aggressive easing path, which should limit the Pound’s downside and provide a floor for its valuation.
Similarly, the ECB, under President Christine Lagarde, emphasized that policy is in a “good place” but explicitly stated it is “not static.” This nuanced communication carefully balances flexibility against any pre-commitment to further easing, effectively pushing back against market bets for rapid consecutive rate cuts. This stance reinforces the euro’s yield advantage and suggests the central bank is in no hurry to loosen policy further, providing a tailwind for the single currency.
In summary, while the policy actions themselves were anticipated, the subtext from both central banks was more supportive than many market participants had positioned for. The emphasis on caution, inflation vigilance, and a gradual approach to any future easing creates a favorable environment for both the euro and sterling to derive strength from relative policy stability in the coming weeks.
Technical Analysis
The EUR/GBP pair continues to trade within its primary uptrend framework, having successfully defended its key ascending support line despite a corrective decline of over 1.5% in the past month. This resilience suggests the underlying bullish structure remains intact.
The technical picture has been reinforced by a recent breakout above a short-term downtrend channel that had contained the correction. This move indicates that the period of consolidation has likely concluded, with buyers regaining control. The pair’s ability to hold above its primary trendline throughout this pullback further confirms the strength of the foundational support.
The immediate focus is a test of resistance at the 0.8800 level. A decisive daily close above this barrier would signal a resumption of the broader uptrend and likely trigger a move toward the next resistance zone. The pair’s ability to convert this level from resistance to support will be critical for sustaining bullish momentum.
Momentum indicators align with this constructive outlook. The Relative Strength Index (RSI) holds above its mid-point, indicating a continued balance of power in favor of buyers. Simultaneously, the Moving Average Convergence Divergence (MACD) remains above its zero line, supporting the view that bullish momentum, while moderating during the correction, has not been broken.
Resistance level: 0.8800, 0.8860
Support level: 0.8750, 0.8700
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