EUR/GBP remains on the defensive and remains above 0.8600

• EUR/GBP falls back on Tuesday, although it manages to hold above 0.8600.
• Expectations of further ECB rate hikes prop up the Euro and offer support.
• The fundamental background warrants some caution on the part of aggressive bullish traders.

The crossing EUR/GBP It attracts some intraday sellers near the 0.8625 zone, though it lacks follow through and manages to hold above the 0.8600 signal mid-European session.

The common currency continues to receive support from increasing bets on further interest rate hikes by the European Central Bank (ECB), which, in turn, is seen as a key factor acting as a tailwind for the cross. EUR/GBP. Following recent hawkish comments from several ECB officials, President Christine Lagarde indicated on Monday that further interest rate hikes were likely as there was no clear evidence that core inflation had peaked.

This, in turn, reinforces expectations that the central bank has not finished raising rates despite falling inflationary pressures. It should be remembered that the general CPI for the euro zone slowed down more than expected, to a year-on-year rate of 6.1% in May, compared to the previous 7.0%. Furthermore, the core CPI slowed from 5.6% yoy to 5.3% last month. That being said, the resurgence in demand for US dollars (USD) is weighing on the Euro and putting some pressure on the EUR/GBP cross.

In addition, speculation that the Bank of England (BoE) will be much more aggressive in tightening its policy to contain stubbornly high inflation is helping to limit the EUR/GBP’s upside. This, in turn, makes it prudent to wait for strong follow-through buying before confirming that the pair has formed a short-term bottom and positioning for any significant recovery from a new yearly low, around the 0.8565 area. played last week.

technical levels