EUR/GBP treads waters toward 0.8600, focus on Eurozone CPI

EUR/GBP treads water to continue its winning streak, trading near 0.8590 during the Asian session on Monday. The pair is consolidating after hawkish statements made by central banks’ officials at the Jackson Hole Symposium on Saturday. The pair experienced downward pressure due to downbeat Eurozone economic data amid the less likelihood of further monetary policy tightening in the upcoming European Central Bank’s (ECB) policy meeting, inculcating a sense of caution in the market.

However, ECB President Christine Lagarde highlighted that the battle against inflation is still ongoing. She emphasized the significance of central banks offering an economic nominal reference point and maintaining price stability. Lagarde also stated the need to keep interest rates at restrictive levels as long as it takes to achieve the ECB's medium-term inflation target of 2%.

On the other hand, the hawkish comments made by Bank of England's (BoE) Deputy Governor Ben Broadbent have provided support to the Pound Sterling (GBP) and exerted mild pressure on the EUR/GBP pair. Broadbent stated that monetary policy may have to continue in a restrictive stance for an extended period, given that the effects of the notable rise in prices are unlikely to disappear rapidly.

Market participants seem to hold the belief that the BoE will likely not have to raise interest rates to the extent that was initially anticipated in order to reduce inflation in light of escalating concerns about a potential recession. However, investors are pricing in the possibility of a 25 basis points (bps) interest rate hike in the September meeting, which might strengthen the British Pound (GBP) against the Euro.

Investors will closely monitor the upcoming preliminary German Consumer Price Index (CPI), the German Retail Sales, and Eurozone CPI data due later this week. These datasets could provide fresh insights into the overall Eurozone’s economic outlook, helping traders in obtaining a clearer understanding of the market dynamics. On the United Kingdom (UK) docket, no high-priority economic data is scheduled for release during the week.