EUR/GBP falls to one-week lows near 0.8600

• EUR/GBP breaks key short-term support.
• Pound recovers ground from multi-month lows.
• UK August CPI annual rate drops below 10% in August.

The EUR/GBP is falling on Wednesday, extending the correction from the highest level in more than a year it reached on Monday at 0.8721. The cross recently bottomed at 0.8624.

The pound gained momentum after breaking the 0.8650 support area. The very short-term outlook points to the downside, while under 0.8650. Below the daily low, the next support stands at 0.8605.

Inflation eases in the UK, IP declines in EZ

Data released in the UK on Wednesday showed inflation eased in August with the annual CPI rate falling from 10.1% to 9.9%, against expectations of a 10.2% reading. It still remains near 40-year highs. Despite the figures, the Bank of England is still expected to raise key interest rates by 50 basis points next week.

On the economic front, Industrial Production showed a decline of 2.3% in the Eurozone against expectations of a more modest decline. The European Central Bank is seen hiking rates again by 75 basis points.

Regarding the energy crisis, the European Union said today it expects to raise €140 billion from windfall taxes on energy companies. The European Commission wants a target to cut electric use by 10%.

Technical levels