EUR/GBP slumps to near 0.8470 as Pound Sterling strengthens after BoE's policy decision

• EUR/GBP falls sharply to near 0.8470 as the BoE retains a gradual rate-cut cycle approach and raises GDP growth forecasts for the year.
• The BoE reduces interest rates by 25 bps to 4.25%, with a 7-2 majority.
• The EU plans to introduce up to 95 billion Euros worth of countermeasures on US imports.

The EUR/GBP pair slides to near 0.8470 during early North American hours on Thursday as the Pound Sterling (GBP) attracts significant bids after the Bank of England (BoE) announces its monetary policy. The BoE reduced interest rates by 25 basis points (bps) to 4.25%, as expected, and retained its "gradual and cautious" policy-easing stance.

Market experts had priced in a 25-bps interest rate reduction due to potential economic risks in the face of tariffs announced by United States (US) President Donald Trump in early April, improving domestic inflation, and declining energy costs.

Seven out of nine Monetary Policy Committee (MPC) members voted for lowering interest rates, while two officials, Catherine Mann and Chief Economist Huw Pill, favored leaving interest rates at 4.5%.

Meanwhile, the BoE has raised its Gross Domestic Product (GDP) forecast for the current year to 1% from 0.75% projected in the February meeting. BoE Governor Andrew Bailey has expressed confidence that the disinflation trend is intact and the central bank has forecasted headline Consumer Price Index (CPI) in the one-year time at 2.4%, down from the forecast of 3% made in February.

Going forward, investors will focus on the US-UK trade deal, which is expected to be announced by US President Trump at 14:00 GMT. On Wednesday, Trump declared that he will announce a bilateral trade deal with one nation, which he referred as "high respected country" through a post on Truth.Social. A report from the New York Times showed that the nation will be the UK.

In the Eurozone region, the European Union (EU) Commission has unveiled countermeasures for tariffs announced by the US. European Trade Commissioner Maros Sefcovic stated that the institution plans to introduce countermeasures on up to 95 billion Euros ($107.2 billion) of US imports, if negotiations with Washington were to fail to eliminate tariffs applied by US President Trump, Reuters reported.