EUR/GBP aims to cross 0.8700 as hawkish ECB bets soar, UK Politics jeopardize

• EUR/GBP is playing around the immediate hurdle of 0.8700 after a firmer rebound.
• The chances of a 75 bps rate hike announcement by the ECB look solid.
• Former UK PM Boris Johnson has asked Rishi Sunak to step back from the UK PM race.

The EUR/GBP pair is hovering near the round-level resistance of 0.8700 in the late Tokyo session. The asset has accelerated after a gap-down opening near 0.8660 and is aiming to overstep the immediate hurdle of 0.8700. The shared currency bulls have picked demand as investors are betting over a bigger rate hike announcement by the European Central Bank (ECB).

Price pressures in the trading bloc are mounting and have not displayed any sign of exhaustion yet. Therefore, ECB President Christine Lagarde is required to tighten its policy further. According to analysts from Rabobank, a 75 basis point (bps) interest rate hike is a done deal. They see the deposit rate reaching 3% by March next year. Currently, the ECB rates stand at 1.25% as the central bank announced a 75 bps rate hike in September.

Apart from that, soaring energy bills are hurting the sentiment of households in Germany. On Friday, Reuters reported that German Parliament is preparing to vote for the approval of a €200 billion emergency rescue package to tackle the energy crisis.

On the UK front, escalating political tensions have turned the pound bulls extremely volatile. The Shortest UK Prime Ministerial term by Liz Truss has dampened the confidence of stakeholders. Meanwhile, the debt crisis in the UK economy has reached the sky and the novel UK prime Minister will face the highest-ever debt burden.

It would be worth watching the efforts from would-be UK Prime Minister and newly appointed Finance Minister Jeremy Hunt in fixing the pile debt mess.

British Conservative Party needs a suitable candidate to maintain decorum and avoid their defeat in General Elections, scheduled for 2024. However, Boris Johnson has asked Rishi Sunak to step down from the UK PM race, which will be decided latest by Friday.