EUR/GBP struggles around 0.8580, upside remain intact on hawkish ECB bets

• EUR/GBP is displaying a minor correction after hitting a high of 0.8580.
• The ECB is expected to sound hawkish and turn the interest rate wheel on the upside.
• A weak majority of the confidence vote in favor of UK PM Boris Johnson is showing some signs of political instability.

The EUR/GBP pair is facing barricades around 0.8580 after a vertical upside move from Monday’s low at 0.8523. A struggle around the critical resistance is hoping for an initiative buying action as advancing odds of a hawkish monetary policy by the European Central Bank (ECB) is strengthening the shared currency bulls.

The ECB is expected to dictate a jumbo rate hike in its monetary policy meeting on Thursday as a hawkish tone is necessary to combat the soaring inflation. The eurozone inflation rate has advanced to 8.1% from the prior print of 7.4% on annual basis. Inflationary pressures are mounting sharply and are affecting the real income of the households in Europe. An inflation figure above 8% is itself a mess for ECB that is needed to fix sooner.

Apart from the ECB interest rate decision, investors will keep an eye on the eurozone Gross Domestic Product (GDP) numbers, which are due on Wednesday. The quarterly and annualized figures are expected to remain unchanged at 0.3% and 5.1% respectively.

Meanwhile, pound bulls are displaying some strength around 0.8580 as long liquidations have kicked in, however, the upside for the asset is intact. Rising concerns over UK PM Boris Johnson’s leadership are hurting the pound bulls.  Although UK’s Johnson has won the confidence vote, the support of only 59% of his own lawmakers does show some political instability in the UK economy. This may keep the pound bulls on the tenterhooks.