- The pound continues to be pressured by the negative economic outlook in the UK.
- The euro continues to rise amid expectations of a 75 rate hike by the ECB.
- EUR/GBP gains momentum after breaking key technical levels.
The EUR/GBP it broke above 0.8605 and jumped to 0.8640, reaching the highest level since July 1. The cross remains near the highs, with a strong bullish tone, as the EUR/USD breaks above 1.0050.
The euro rises for the fourth consecutive day against the pound, accumulating a gain of more than 200 pips. The impressive rally may have more to go, especially if EUR/GBP holds above 0.8630. The next resistance is located at 0.8650, followed by 0.8670 and 0.8720.
Inflation in the euro zone, fear in the United Kingdom
On Wednesday, Eurozone inflation data showed a new high, with the annual rate reaching 9.1% (above the 9% market consensus). The figures favored expectations of a 75 basis point “jumbo” rate hike by the European Central Bank at next week’s meeting. Additionally, more ECB officials offered hawkish comments. UK and Eurozone bond yields continue to rise in anticipation of central bank rate hikes. European bonds are on track to suffer the worst month in their history.
In the UK, the negative economic outlook, the energy crisis and rising inflation continue to weigh on the pound. The currency is about to post the biggest monthly decline against the dollar since October 2016.
Also weighing on the pound is the tone of caution in all financial markets, which tends to affect the pound more than the euro. Wall Street is flat on Wednesday with the major indices at the lowest level in a month, while the FTSE 100 is poised to end down 0.70%.
Technical levels
Source: Fx Street
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