EUR/GBP jumps to fresh daily highs above 0.8580 after BoE policy announcements

• EUR/GBP rose sharply during the European trading hours on Thursday.
• Dovish tone in BoE's policy statement is weighing on GBP.

The EUR/GBP pair gained nearly 50 pips with the initial market reaction to the Bank of England's (BoE) policy statement and touched a fresh daily high of 0.8590 before retreating modestly. As of writing, the pair was up 0.5% on the day at 0.8580.

BoE refrains from delivering hawkish message

Although the BoE's Monetary Policy Committee (MPC) decided to leave the benchmark interest rate unchanged at 0.10% as expected and maintained the Asset Purchase Facility at £895 billion, the dovish tone in the publication hurt the GBP.

"Most MPC members felt policy should both lean strongly against downside risks to the outlook and ensure that the recovery was not undermined by a premature tightening in monetary conditions," the BoE noted. Reflecting the broad-based GBP weakness, the GBP/USD pair fell sharply and is currently trading at 1.3920, where it's down 0.27% on a daily basis.

Breaking: Bank of England leaves policy settings unchanged as expected.

Regarding the inflation outlook, the BoE noted that the MPC felt that the weight should be put on inflation developments over a "somewhat longer period of time."

Technical levels to watch for