EUR/GBP eyes a break above 0.8630 despite Eurozone interest rate peaking sooner

• EUR/GBP aims to deliver more gains above 0.8630 as the focus shifts to ECB Lagarde’s speech.
• ECB policymakers see interest rates peaking in the near term.
• UK’s food supply crisis is impacting Pound Sterling dramatically.

The EUR/GBP pair has witnessed a firmer recovery from 0.8580 and has reached near the critical hurdle of 0.8630 in the Asian session. The Euro bulls have seen significant demand despite the European Central Bank (ECB) being near to reaching an interest rate peak ahead. Therefore, the monetary policy meeting scheduled for next week will be very crucial.

The cross is attempting a decisive break above the critical resistance of 0.8630 for the fourth time this week. Hawkish commentary from ECB policymakers is keeping reins in the Euro bulls.

Constantinos Herodotou, Governor of the Central Bank of Cyprus, said, “There will be another hike in rates, but we are very near neutral rate.” ECB Chief Economist Phillip Lane is dubious about the inflation peak as it has been achieved or is still to come next year. He further added that he expects more rate hikes, but "a lot has been done already".

Meanwhile, investors are awaiting the speech from ECB President Christine Lagarde, which will be announced on Thursday. ECB President is expected to trim inflation guidance in her speech amid weaker Retail Sales data.

Monthly Eurozone Retail Sales data contracted by 1.8%, while expectations were aiming for a 1.7% contraction this week. Also, the economic data contracted by 2.7% on an annual basis against the consensus of a 2.6% contraction. A decline in demand by the households indicates that policy tightening measures adopted by the European Central Bank (ECB) are augmenting their job effectively. This might force firms to look for a decline in prices for goods and services to keep up their sales target.

On the United Kingdom front, the soaring food supply crisis led by soaring costs and labor shortages has impacted the Pound Sterling. Minette Batters, president of the National Farmers Union, said “We need government and the wider supply chain to act now. Tomorrow could well be too late.” as reported by Financial Times. The economy is already facing higher food inflation, and the food supply crisis will accelerate food inflation further.