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Volatility expected ahead of BOE rate decision

Volatility expected ahead of BOE rate decision

EUR/USD is heading south towards 1.0200 in early Europe, as bulls failed to keep reins near the monthly high. Mounting US-China tensions over Taiwan and recession fears weigh, while the US dollar falls in tandem with the yields. 

GBP/USD is dropping below 1.2250, as investors turn away from higher-yielding assets such as the GBP. The pair fails to benefit from a weaker US dollar, as Treasury yields wilt amid increased safe-haven flows into the US bonds. 

The EUR/GBP pair is testing the upside break of the consolidation formed in a range of 1.1956-1.1980 in early Tokyo. On a broader note, the shared currency bulls have defended a reclaim of a three-month low of around 0.8350. The pre-anxiety period ahead of the interest rate decision by the Bank of England (BOE) will result in wild swings in the counter.

An interest rate policy by the BOE on Thursday will likely conclude with an outcome of an interest rate hike by 25 basis points. A quarter-to-a-per cent rate hike decision by BOE Governor Andrew Bailey will lift the interest rates to 1.5%.

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