EUR/GBP trades in red below 0.8500 after BoE's policy announcements

• Bank of England (BoE) left policy rate unchanged at 0.75% as expected.
• BoE says modest tightening of policy may be needed if economy recovers broadly.
• Retail Sales in UK declined by 0.6% in November.

The EUR/GBP pair spiked to a fresh session high of 0.8523 with the initial reaction to the Bank of England's (BoE) monetary policy statement but quickly reversed its direction. As of writing, the pair was down 0.05% on the day at 0.8490.

No surprises from BoE

As expected, the BoE left its policy rate unchanged at 0.75% as expected. Although the bank refrained from addressing the potential impact of the UK election on the economy, "if risks do not materialise and the economy recovers broadly as expected, some modest tightening of policy, at a gradual pace and to a limited extent, may be needed," it noted to help the GBP gather strength against its rivals.

In the meantime, the data published by the UK's Office for National Statistics (ONS) earlier in the day showed retail sales in November contracted by 0.6% to limit GBP's gains.

Friday's Gross Domestic Product (GDP) data from the UK will be the next significant catalyst for the pair. 

Technical levels to watch for