EUR/GBP sees downside below 0.8630 on deepening Eurozone energy crisis, UK leadership eyed

• EUR/GBP is expected to display more losses to near 0.8620 amid escalating Eurozone energy crisis.
• As Eurozone HICP has scaled above 9%, odds for a 75 bps rate hike by the ECB have strengthened.
• UK PM contender Liz Truss has promised o scale down energy bills if she becomes the next PM.

The EUR/GBP pair has given a downside break of the consolidation formed in a narrow range of 0.8634-0.8644 in the Asian session. The cross is expected to decline towards the immediate cushion of 0.8620 as escalating Eurozone energy crisis is weighing over the shared currency bulls. On a broader note, the pair has declined after a failed attempt of overstepping the previous week’s high at 0.8670.

As Russian gas giant Gazprom has adopted a heated route after G7 countries issued a price cap on Russian oil, the energy crisis in the old continent has deepened further. The closure of the Nord Stream 1 pipeline under the Baltic Sea for an indefinite period citing leakage issues has accelerated the energy crisis, energy prices, and energy bills for households for a substantial period. Apart from that, growth prospects have been hit dramatically.

Adding to that, the growth prospects are also expected to witness a serious impact as the European Central Bank (ECB) policymakers are gearing up for hiking its interest rates. It is highly likely that ECB President Christine Lagarde will step up interest rates by 75 basis points (bps), taking it to 1.25%. The most preferred inflation-gauge tool of the ECB, Harmonized Index of Consumer Prices (HICP) has scaled above 9%.

On the UK front, investors are keenly awaiting the outcome of the UK Prime Minster elections. The world's sixth largest economy has been through political instability after the resignation of UK PM Boris Johnson. The UK economy is also facing the headwinds of soaring energy prices. And, UK Foreign Minister Liz Truss has favored an immediate action to combat ramping up energy bills if she becomes the next Prime Minister.