EUR/GBP rebounds from below 0.8900 as hawkish ECB bets mount

The EUR/GBP pair has picked demand after dropping below the round-level cushion of 0.8900 in the early Tokyo session. The cross aims to extend its recovery as bets for more interest rate hikes by the European Central Bank (ECB) in its upcoming monetary policy are mounting vigorously.

Annual inflation in Eurozone has softened significantly to 8.5% as the European Central Bank (ECB) is continuously hiking interest rates. Supply chain disruptions are easing now, along with energy prices. Despite a win-win situation for the Eurozone inflation, ECB President Christine Lagarde is expected to remain hawkish ahead.

Isabel Schnabel, a Member of the European Central Bank (ECB)’s Executive Board, wrote in a press release entitled, 'Monetary policy in times of pandemic and war' that inflation momentum remains ‘quite elevated ‘ but cannot give all clear on inflation yet and that the ECB Intends to raise rates by 50bps in March.

For guidance on Eurozone inflation, ECB policymaker Francois Villeroy de Galhau said on Tuesday that the Eurozone was close to the peak of inflation, as reported by Reuters. He further added, "I don't think we have to choose between fighting inflation and avoiding a recession,"

On Wednesday, investors will keenly focus on the German inflation data. The preliminary German Harmonized Index of Consumer Prices (HICP) (Jan) is expected to escalate to 10.0% from the former release of 9.6%.

Meanwhile, Pound Sterling is likely to dance to the headlines of a mini cabinet re-shuffle by United Kingdom PM Rishi Sunak after completing his stressed 100 days of work. Sunak will appoint a new Conservative Party chair after he sacked Nadhim Zahawi over a tax scandal more than a week ago as part of a wider overhaul, officials told Cabinet ministers Monday, as reported by Bloomberg.