EUR/GBP jumps to near 0.8640 as ECB Lagarde reiterates hawkish guidance

• EUR/GBP has quickly jumped to near 0.8640 as ECB is expected to raise interest rates further.
• ECB Lagarde reiterated that more interest rate hikes are appropriate to make monetary policy sufficiently restrictive.
• Investors are awaiting the speech from BoE Bailey for further guidance.

The EUR/GBP pair has climbed swiftly to near the crucial resistance of 0.8640 in the European session. The cross has picked immense strength as the European Central Bank (ECB) is consistently reiterating the need for more interest rate hikes as core inflation in the Eurozone is extremely persistent.

ECB President Christine Lagarde reiterated that more interest rate hikes are appropriate to make monetary policy sufficiently restrictive to tame stubborn inflation. Inflation in Eurozone is thrice the desired rate of 2% and further policy-tightening is appropriate to bring down inflation.

Meanwhile, fears of a longer recession in the German economy could halt the rally in the Euro. Risks of an elevated recession in the German economy have fueled as business morale has slipped consecutively for the second time. The Ifo Institute reported that the business climate index fell to 88.5 in June from the 91.5 figure recorded in May.

Investors should note that the German economy has already reported a technical recession by registering a contraction in Gross Domestic Product (GDP) consecutively for two quarters.

On the Pound Sterling front, investors are awaiting the speech from Bank of England (BoE) Governor Andrew Bailey at the European Central Bank (ECB) forum of Central Banking. Investors will keenly focus on the interest rate guidance as inflationary pressures in the United Kingdom are not signaling any slowdown despite consistent policy-tightening by the central bank.

Recent jumps in prices of second-hand automobiles and air travel have offset the impact of declining gasoline prices, which pushed the headline Consumer Price Index (CPI) higher than expectations.