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- EUR/GBP strengthens to around 0.8535 in Wednesday’s early European session.
- US carries out more strikes on Iran.
- Traders boosted wagers on faster BoE and ECB rate hikes after rising oil prices.
The EUR/GBP cross gains momentum to near 0.8535 during the early European trading hours on Wednesday. Traders ramp up bets on the Bank of England (BoE) and European Central Bank (ECB) rate hikes as oil price surge reignites inflation fears. ECB policymakers Fabio Panetta and Joachim Nagel are set to speak later in the day.
US President Donald Trump’s reimposition of a blockade on Iranian ships transiting the Strait of Hormuz and payment demand for all other cargo have raised oil-driven inflation concerns. On Tuesday, the US Central Command (CENTCOM) said that it launched further attacks on Iran, hitting dozens of military targets near the Strait of Hormuz and Iranian coastal areas.
Iran’s Islamic Revolutionary Guard Corps (IRGC) said on Wednesday that it had targeted what it described as command-and-control, logistics, fuel and military equipment facilities belonging to the US Fifth Fleet in Bahrain, per Reuters.
Traders are now fully pricing a 25 basis points (bps) BOE hike by September, followed by another before year-end. They also expect the ECB to raise rates by a quarter-point in September, with another hike by year-end all but certain, according to Bloomberg.
ECB President Christine Lagarde emphasized that the central bank remains strictly data-dependent. The official policy account explicitly noted that the June hike was neither a guaranteed sequence nor a guaranteed one-off move. On Wednesday, ECB Governing Council member Martin Kocher said that the central bank prepared to implement monetary policy measures whenever necessary.
