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EUR/GBP trades around 0.8560 as investors remain wary of ECB policy.
Investors awaited a speech by European Central Bank President Christine Lagarde for further clues on the economic outlook.
European Central Bank member Pierre Onsch stressed that inflation will continue and monetary policy will be further tightened.
EUR/GBP hovered around 0.8560 during the Asian session on Monday, struggling to stabilize on the prospect of a rate hike by the European Central Bank (ECB). EUR/GBP is under downward pressure as investors remain cautious over concerns that further monetary tightening by the European Central Bank risks tipping the euro zone economy into recession.
Traders are awaiting ECB President Christine Lagarde’s press conference on Monday. Lagarde is likely to detail how the ECB views the current and future economic situation in the euro zone. The policymaker is likely to provide explanations for the ECB’s monetary policy decisions.
In addition, ECB Governing Council member Pierre Wunsch pointed out that continued inflation is a factor that advocates the need for further tightening of monetary policy. “I tend to think we may need to take further action,” Pierre told Bloomberg Radio on Saturday. At first, the policymaker cited waning price pressures, but then added that the ECB’s 2% target rate would not be achieved until 2025 because of persistent inflation.
Elsewhere, EUR/GBP traders are staying cautious amid grim economic conditions in the United Kingdom (UK) and a hawkish outlook for a possible 25 basis point (bps) rate hike by the Bank of England (BOE) at its September meeting.
Over the weekend, Chancellor of the Exchequer Jeremy Hunt told Reuters: “We are on track to halve inflation this year and by sticking to our plan we will take the pressure off households and businesses. “. Hunt also said on the BBC (BBC) that inflation was expected to pick up briefly in September, but was then expected to fall to around 5.0%, in line with the Bank of England’s (BOE) forecast.
Market participants will be watching for British policymakers to return to parliament after their holidays, and they are likely to express optimism about Friday’s revised economic data that showed Britain’s post-epidemic recovery was faster than previously thought.
