EUR/GBP rallies toward fourth straight day, hits monthly highs near 0.8650

• Pound remains under pressure on negative UK economic outlook.
• Euro keeps rising amid expectations of a 75 rate hike from the ECB.
• EUR/GBP gains momentum after breaking key technical levels.

The EUR/GBP broke above 0.8605 and jumped to 0.8640, reaching the highest level since July 1. The cross remains near the top, with a strong bullish tone as EUR/USD breaks above 1.0050.

The euro is rising for the fourth consecutive day against the pound, accumulating a gain of more than 200 pips. The impressive rally can have more legs to go particularly if EUR/GBP holds above 0.8630. The next resistance stands at 0.8650 followed by 0.8670 and then 0.8720.

Inflation in EZ, fear in UK

Earlier on Wednesday, Eurozone inflation data showed a new record with the annual rate reaching 9.1% (above the 9% of market consensus). The numbers favored expectations of a “jumbo” rate hike of 75 basis points from the European Central Bank at next week’s meeting. Also, more ECB officials offered hawkish remarks. UK and EZ bond yields continue to rise ahead of rate hikes from central banks. European bonds are on track for their worst month ever.

In the UK, the negative economic outlook, the energy crisis and soaring inflation keep hitting the pound. The currency is about to post the biggest monthly drop versus the US dollar since October 2016.

Also weighing on GBP is the cautious tone across financial markets that usually affect the pound more than the euro. Wall Street is flat on Wednesday with main indices at the lowest level in a month while the FTSE 100 is about to end with a 0.70% decline.

Technical levels