EUR/GBP renews seven-month high near 0.8600 on hawkish ECBspeak, UK GDP eyed

• EUR/GBP extends the previous day’s gains to refresh multi-day peak, grinds higher of late.
• ECB’s Lagarde, de Guindos flashed signals for July rate hike in latest speeches.
• Brexit negatives, doubts over BOE’s next moves weigh on GBP ahead of the key UK data.

EUR/GBP bulls take a breather after refreshing seven-month high with eyes on the top-tier UK data. That said the quote remains steady at around 0.8600 during Thursday’s Asian session.

The cross-currency pair rallied the most in a week the previous day as a slew of European Central Bank (ECB) policymakers sound hawkish. Also favoring the pair buyers were downbeat Brexit chatters and fears of the further hardships for the UK’s central bank, namely the Bank of England (BOE).

Multiple European Central Bank (ECB) officials, including President Christine Lagarde and Vice President Luis de Guindos, flagged fears of inflation while also fueling calls for the July rate hike. ECB’s Lagarde said, “My expectation is that APP should be concluded early in Q3; followed by a rate hike that could come just ‘a few weeks’ later.” On the same line was ECB Vice President de Guindos who said that inflation is likely to remain at the 4%-5% range at the end of the year in the eurozone. “The debt-buying programme, the Asset Purchase Programme (APP), is likely to stop in July, de Guindos further added per Reuters.

On the other hand, the European Union (EU) showed readiness to suspend trade deals with the UK if it unilaterally revokes the Northern Ireland Protocol (NIP), per Bloomberg. It’s worth noting that the pro-Europe Sien Finn’s victory in Irish elections recently triggered Brexit woes.

On a broader front, yields remain pressured and the stock futures print mild gains which in turn allow the Euro to remain firmer.

Moving on, the UK’s Q1 2022 GDP is expected to soften to 1.0% QoQ versus 1.3% prior, which in turn will prove right the market’s fears over the BOE’s inability to battle the inflation, howsoever hard it tries.

Also read: UK GDP Preview: BOE’s R-word to overshadow a mild expansion

Technical analysis

A daily closing beyond 0.8600 becomes necessary for the EUR/GBP bulls to keep reins, otherwise, a pullback move towards the previous resistance line from February, near 0.8540, can’t be ruled out.