EUR/GBP remains on the defensive, holds steady above 0.8600 mark
- EUR/GBP edges lower on Tuesday, albeit manages to hold above the 0.8600 mark.
- Expectations for additional ECB rate hikes underpin the Euro and offer support.
- The fundamental backdrop warrants some caution for aggressive bullish traders.
The EUR/GBP cross attracts some intraday sellers near the 0.8625 region, albeit lacks any follow-through and manages to hold above the 0.8600 mark through the mid-European session.
The shared currency continues to draw support from rising bets for additional interest rate hikes by the European Central Bank (ECB), which, in turn, is seen as a key factor acting as a tailwind for the EUR/GBP cross. Against the backdrop of the recent hawkish comments by several ECB officials, President Christine Lagarde indicated on Monday that additional interest rate rises were likely as there is no clear evidence that underlying inflation has peaked.
This, in turn, reaffirms expectations that the central bank is not done raising rates despite a fall in inflationary pressures. It is worth recalling that the headline Eurozone CPI decelerated more than anticipated to the 6.1% YoY rate in May from 7.0% previous. Moreover, Core CPI slowed from 5.6% YoY to 5.3% last month. That said, resurgent US Dollar (USD) demand is weighing on the Euro and exerting some pressure on the EUR/GBP cross.
Furthermore, speculations that the Bank of England (BoE) will be far more aggressive in policy tightening to contain stubbornly high inflation further contributes to capping the upside for the EUR/GBP cross. This, in turn, makes it prudent to wait for strong follow-through buying before confirming that spot prices have formed a near-term bottom and positioning for any meaningful recovery from a fresh YTD low, around the 0.8565 region touched last week.
Technical levels to watch
Author
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
