EUR/GBP jumps to near 0.8600 as ECB Lagarde delivers hawkish stance

• EUR/GBP has jumped to near 0.8600 after hawkish commentary from ECB Lagarde at the ECB forum of Central Banking.
• ECB Kazaks cleared that there are strong risks of persistence in inflation and that expectations of rate cuts in early 2024 are wrong.
• The Pound Sterling is facing pressure as elevated inflation in the UK is threatening their economic outlook.

The EUR/GBP pair has climbed to near the round-level resistance of 0.8600 in the London session. The cross has picked strength as European Central Bank (ECB) President Christine Lagarde has delivered hawkish remarks in the ECB forum of Central Banking.

ECB Lagarde has conveyed that inflation in Eurozone is extremely high and the central bank is required to make monetary policy sufficiently restrictive to tame price pressures. She further added the effect on inflation from rising wages has recently been amplified. Christine Lagarde also stated that the ECB is ensuring that inflation expectations remain anchored as the wage catch-up process plays out.

About ECB monetary policy outlook, ECB policymaker Matin Kazaks said on Tuesday that he sees the central bank raising interest rates beyond the July meeting if inflation remains too high. ECB Kazaks cleared that there are strong risks of persistence in inflation and that expectations of rate cuts in early 2024 are wrong.

Meanwhile, the Pound Sterling is facing pressure as elevated inflation in the United Kingdom is threatening their economic outlook. Higher interest rates by the Bank of England (BoE) are going to decline credit disbursals by commercial banks as firms would prefer to avoid higher interest obligations.

UK’s core inflation has jumped to fresh highs of 7.1%, which is making BoE Governor Andrew Bailey uncomfortable. Investors are anticipating that BoE Bailey is failing in achieving price stability.