EUR/GBP grinds higher towards 0.8500, focus on ECB, UK PM Truss

• EUR/GBP remains mildly bid around 12-week top ahead of ECB’s verdict.
• Firmer EU data, BOE policymakers’ testimony and hawkish ECB bets favored buyers the previous day.
• Pullback in yields, sluggish markets supersede UK’s readiness for more stimulus.
• UK PM Liz Truss will unveil her aid plan on Thursday, ECB to announce one more rate hike amid recession fears.

EUR/GBP stays firmer around 0.8685 heading into Thursday’s European session, after rising the most in three months, amid hawkish hopes from the European Central Bank (ECB). Also keeping the cross-currency pair on the front foot could be the fears of disappointment from incoming UK PM Liz Truss.

That said, Britain's new Prime Minister Liz Truss will on Thursday scrap the country's fracking ban and will seek to make more use of North Sea reserves, the Telegraph newspaper reported, per Reuters. The report also mentioned that the reported moves are part of what her office said will be a "bold plan of action" to support households and businesses with soaring energy bills while also seeking to boost the domestic energy supply.

Elsewhere, the market bets suggest that the ECB is almost certain to announce the 75 basis points (bps) rate hike during today’s monetary policy meeting.

Even so, the EUR/GBP bulls need validation from Fed Chair Jerome Powell’s speech and hawkish comments from ECB Chairman Christine Lagarde.

On Wednesday, firmer EU data and Bank of England (BOE) policymakers’ testimony seemed to have propelled the pair.

That said, the Eurozone’s final reading of the Gross Domestic Product (GDP) rose by 0.8% QoQ in the three months to June of 2022 (Q2 2022) vs. 0.6% initial forecasts. Also, the YoY figures improved to 4.1% in Q2 vs. 3.9% marked in the initial forecasts.

Elsewhere, BOE policymakers appear to fail in defending their present monetary policy stance. “I would expect headline inflation to decline in short term,” said Bank of England (BOE) Chief Economist Huw Pill testifying on the bank’s Monetary Policy Report (MPR) before Parliament's Treasury Select Committee. "If we think quantitative tightening (QT) is causing too much tightening, we can offset that with less interest rate increases," Added BOE’s Pill.

BOE policymaker Catherine Mann also testified in front of the Parliament's Treasury Select Committee and said, “More forceful bank rate moves open door for policy hold or reversal later.”

Furthermore, BOE’s Silvana Tenreyro was also among the policymakers to testify before the Parliament's Treasury Select Committee as she mentioned, “I will consider further rate rises until we have clear evidence of impact on inflation.”

Above all, BOE Governor Andrew Bailey’s comments in front of the Parliament's Treasury Select Committee gained major attention as he said, “Putin is putting the UK into recession, not the BOE MPC.” The BOE Boss also stated that he welcomes the fact that there will be announcements on fiscal policy this week.

Looking forward, UK PM Truss’ plan and the ECB’s monetary policy meeting will be important for the EUR/GBP traders for fresh impulse.

Technical analysis

A daily closing beyond July’s peak surrounding 0.8680 enables EUR/GBP to aim for the yearly top marked in June, close to 0.8720.