EUR/GBP finds a cushion at around 0.8420 despite a potential German energy crisis ahead

• EUR/GBP has picked bids around 0.8420, however, the bullish reversal seeks more evidence.
• Gas supply cut-off to Germany due to unscheduled maintenance has soared fears of a German energy crisis.
• A fresh forecast for UK CPI at 18% has created havoc for BOE policymakers.

The EUR/GBP pair has attempted a rebound after concluding the downside move to near 0.8412 in the Tokyo session. The shared currency bulls are defending further downside despite soaring expectations of a potential German energy crisis ahead.

Investors should be aware of the fact that Russia will halt natural gas supplies to Europe for the last three days of August to run the unscheduled maintenance under the Baltic Sea to Germany. The unexpected natural gas supply cut to Germany from Nord Stream 1 pipeline will shore up the imbalance in the energy demand-supply mechanism. Also, the arrival of the winter season in Germany will scale up the energy demand. And, more supply issues in an already vulnerable German energy market may accelerate a sell-off in the shared currency.

A supportive move in the cross also banks upon mixed German Purchasing Managers Index (PMI) data. The Manufacturing PMI landed better than expectations and the prior release at 49.8. However, the Services PMI contracted to 48.2 against the forecast of 49 and the former release of 49.9.

On the pound front, rising tensions over soaring price pressures are likely to force the market participants to dump sterling. The inflation rate in the UK zone is still at par with a four-decades high at 10.1%. Now, analysts from US Bank Citi Have come forward with fresh forecasts for British consumer price inflation that it is set to peak at 18% in early 2023. Price pressures in the UK zone are not getting contained and are creating havoc for the Bank of England (BOE) policymakers.