EUR/GBP oscillates around 0.8600 ahead of Eurozone Inflation

• EUR/GBP is juggling around 0.8600 as the focus has shifted to Eurozone Inflation data.
• ECB’s Lane claimed wages as the primary driver of inflation for the coming years.
• Investors await UK PM Sunak’s first major foreign policy speech.

The EUR/GBP pair is displaying back-and-forth moves in a narrow range around the 0.8600 figure in the Tokyo session. The asset has turned sideways as investors are awaiting the release of the Eurozone inflation data for further guidance, which will release on Wednesday.

The asset is in a rangebound mode for the past week amid the unavailability of potential triggers. Now, the release of the preliminary Eurozone Harmonized Index of Consumer Prices (HICP) will ease obscurity. As per the consensus, the headline HICP will decline to 10.4% vs. the prior release of 10.6%. While the core HICP data that excludes oil and food prices is seen unchanged at 5%.

European Central Bank (ECB) Chief Economist Philip Lane said on Friday, “Wages will be the primary driver of inflation over the coming years.” An adjustment in nominal wages due to a cumulative increment in the cost of living will play out for several years. A time will arise when inflationary pressures will cool down but accelerated nominal wages will sustain, which would lead to a robust demand culture.

Apart from that, investors await more development on the European gas price cap structure. Intercontinental Exchange (ICE) has warned that the finalization of the ceiling on European gas would force energy traders to stump up an additional $33 bln in margin payments, as reported by Financial Times. Such a large increase in margin requirements could “destabilize the market”,

On the United Kingdom front, investors are shifting their focus towards the first major foreign policy speech from UK Prime Minister Rishi Sunak, which he plans to deliver on Monday in London's financial district.

A report from Natixis on UK Pound citing “Sterling’s reserve currency role is under threat has spooked investors.  According to the report, the Sterling is a major reserve currency, accounting for 5% of global foreign exchange reserves while the United Kingdom accounts for only 3% of global GDP.