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Euro edges up against pound as oil shock boosts ECB rate expectations
EUR/GBP rose to around 0.8535 as traders increased odds of a BOE September hike and an ECB quarter-point move, citing renewed inflation concerns from a surge in oil linked to Strait of Hormuz tensions.
EUR/GBP moved higher in early European trade on Wednesday, climbing toward 0.8535, as market participants leaned more toward rate-hike expectations for both the Bank of England and the European Central Bank. FXStreet attributed the shift to a renewed oil price surge that is reviving fears of inflation pressure.
The backdrop includes US President Donald Trump’s reimposition of a blockade on Iranian ships transiting the Strait of Hormuz, along with a payment requirement for other cargo, according to the outlet. FXStreet also pointed to recent comments from US Central Command, saying it launched further attacks on Iran near the strait and Iranian coastal areas, while Iran’s IRGC said it targeted facilities connected to the US Fifth Fleet in Bahrain.
FXStreet said traders are fully pricing a 25 basis point BOE hike by September, followed by another before year-end. The outlet also reported that expectations for the ECB call for a quarter-point increase in September and another hike by year-end, while noting ECB President Christine Lagarde’s emphasis that policy remains strictly data dependent.
Ahead of speeches later in the day, FXStreet cited remarks from ECB policymakers including Martin Kocher, who said the central bank is prepared to implement monetary policy measures whenever necessary. The outlet said the message reads as mildly hawkish overall, but that language suggesting no secondary effects are observed tempers any push toward aggressive near-term tightening.