The Euro is on track for its eighth gain in nine sessions against the Pound, and the explanation that would normally cover a run of that length is not available.
Bank Rate sits 150 basis points above the European Central Bank deposit rate, precisely where it has sat since the middle of June, and that spread is what dragged this cross to a one-year low in the first place
The gap has not moved. The cross has. The spread that never narrowed Currencies do not trade the rate differential printed on the screen.
They trade the one the forward curve expects to exist in six months, which is how a cross can sit still for weeks under an enormous posted gap and then travel a full percent while that gap is unchanged. Since the middle of July the expected differential has narrowed steadily, and almost all of that narrowing has come from the British side. The mid-July low just over 0.8450 marked the point of maximum agreement that the Bank of England would stay restrictive for longer than the European Central Bank.