- EUR/GBP is oscillating in a narrow range of around 0.8780, however, the upside looks solid amid hawkish ECB bets.
- The odds for a 50 bps interest rate hike by the ECB are soaring dramatically.
- UK’s labor shortage could propel the PPI figures ahead.
The EUR/GBP pair is displaying back-and-forth moves around 0.8700 in the Asian session. The cross corrected firmly in Monday’s New York session after printing a fresh four-day high around 0.8815. The asset is expected to resume its upside journey amid rising hawkish bets for the interest rate decision by the European Central Bank (ECB).
Despite falling energy prices in the shared currency region, ECB policymakers are still not convinced that the Eurozone inflation will trim further meaningfully. Therefore, ECB policymakers are reiterating their hawkish stance on the interest rates for the upcoming monetary policy, scheduled for next week.
ECB policymaker Peter Kazimir cited on Monday that inflation easing was good news but added that it was not a reason to slow the pace of interest rate hikes, as reported by Reuters. He further added, "I am convinced that we need to deliver two more hikes by 50 basis points (bps).”
Also, ECB President Christine Lagarde supported the hawkish view, reiterating the statement that "We have made it clear that ECB interest rates will still have to rise significantly at a steady pace to reach levels that are sufficiently restrictive.”
The latest Reuters poll of economists claims the European Central Bank (ECB) hiking rates by another 50 bps at its February monetary policy meeting while the policy rate is expected to reach 3.25% by mid-year.
On the United Kingdom front, investors are focusing on the release of Wednesday’s Producer Price Index (PPI) data. UK's inflation rate has declined gradually after recording a fresh 41-year high at 11.1%. Thanks to the falling energy prices that has softens the stubborn inflation. Now investors await the release of the UK PPI numbers for fresh cues.
As per the consensus, the core PPI output is seen higher at 13.9% vs. the former release of 13.3%. Shortage of labor and rising wages for addressing the former could be the reason behind rising prices of goods and services at factory gates.
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