EUR/GBP oscillates above 0.8500 on expectations of a rate hike by the ECB

• EUR/GBP is juggling in a six-pip range amid a light economic calendar this week.
• The ECB is expected to announce its first rate hike after the pandemic period sooner.
• Fixing the CPI print of 9% will be a laborious task for the BOE.

The EUR/GBP pair is consolidating in a narrow range of 0.8498-0.8504 in the Asian session as investors are confused over the selection of currency for parking their liquidity. A firmer risk-on impulse in the market has strengthened the pound and the shared currency against the greenback, which has dwindled the market participants in choosing the optimal one. On a broader note, the shared currency bulls look more confident as the asset has remained positive over the last week.

The discussions over the decision of an embargo on oil from Russia have resumed and now Hungary is opposing the Russian oil prohibition amid its higher dependency on fossil fuels and energy from Russia. The European Union has urged Hungary to support the ‘Isolating Russia’ movement after it invaded Ukraine. Well, discussions are still on and its possibility seems sooner now.

Apart from that, investors expect a rate hike announcement by the European Central Bank (ECB). Inflation is scaling higher in the eurozone and the ECB is still far from its first rate hike after the pandemic. Dutch Central Bank head and ECB Governing Council member Klass Knot stated on Wednesday, that inflation expectations will remain well-anchored at its upper limit and a rate hike by 50 basis points (bps) is not off the table.

On the pound front, mounting fears of a recession could affect the sterling going forward. The annual inflation figure has reached 9% in the UK. The Bank of England (BOE) has got a laborious task of fixing the inflation mess, which will compel the BOE to remain extremely hawkish on monetary policy for a longer horizon.