EUR/GBP struggles around 0.8660, upside remain favored on hawkish ECB bets

• EUR/GBP is facing weak barricades around 0.8660, a break above the same looks likely.
• The ECB is set to hike its interest rates next week as the HICP has crossed 9%.
• An extension in the energy supplies cut period to Germany may strengthen energy crisis fears.  

The EUR/GBP pair has refreshed its two-month high at 0.8661 and is now struggling at elevated levels. The asset continued its four-day winning streak on Thursday after overstepping Wednesday’s high at 0.8653. The cross has displayed a sheer upside move after the inflation rate in the Eurozone crossed 9% comfortably.

On Wednesday, European Central Bank (ECB)’s preferred inflation indicator Eurozone Harmonized Index of Consumer Prices (HICP) landed at 9.1%, higher than the expectations of 9% and the prior release of 8.9%. As price pressures are soaring in the shared currency region amid accelerating energy bills after energy supply cuts by Russia, the inflation rate is skyrocketing.

This has strengthened the odds of a bumper rate hike announcement by the ECB next week. ECB’s Governing Council member and German central bank head Joachim Nagel on Wednesday cited that the ECB “urgently needs to act decisively next week,” He further added that “We need a strong rate hike in September,”

Apart from that, investors are also worried over an extension of unscheduled maintenance of the Nord Stream 1 pipeline under the Baltic Sea from Russia. The ongoing tensions between eurozone and Russia after the former boycotted oil and energy imports from the latter may result in an extension of the maintenance period as Russia eyes revenge. An occurrence of the same will accelerate fears of an energy crisis in Germany. As Germany is a core member of the European Union (EU), an occurrence of a German energy crisis could impact shared currency dramatically.

On the pound front, a light economic calendar holds shared currency responsible for movement in the cross ahead. On a broader note, political instability in the UK zone is weakening the sterling bulls. This month, elections for UK Prime Minister will be the key event to watch.