• EUR/GBP scales higher for the fourth straight day and touched over a one-week high on Thursday.
• The ECB’s hawkish outlook continues to underpin the Euro and remains supportive of the move.
• Expectations for more aggressive BoE rate hikes might hold back bulls from placing fresh bets.

The EUR/GBP cross gains some positive traction for the fourth successive day on Thursday and trades just above the 0.8600 mark during the Asian session, or over a one-week high.

The British Pound's relative underperformance could be solely attributed to some repositioning trade ahead of the key central bank event risk - the highly-anticipated Bank of England (BoE) policy meeting. Apart from this, the recent hawkish comments by several European Central Bank (ECB) officials continue to lend some support to the shared currency and act as a tailwind for the EUR/GBP cross. It is worth recalling that ECB Executive Board member Isabel Schnabel said earlier this week that officials can’t afford to be complacent about inflation and shouldn’t worry about raising borrowing costs too far.

Separately, Slovak central bank governor Peter Kazimir said that if the ECB fails to root out inflation now, it could get entrenched in the economy and a continuation of monetary policy tightening is the only reasonable way ahead. The markets were quick to react and have now fully priced in a 4% terminal rate by October, with a 25 bps hike at the July ECB meeting seen as almost a done deal. This, in turn, assists the EUR/GBP cross to build on this week's recovery move from the 0.8520-0.8515 region, or its lowest level since August 2022, though hawkish BoE expectations might cap any further gains.

The stronger UK consumer inflation figures released on Wednesday lifted market bets for a jumbo 50 bps BoE rate hike later today. Moreover, sticky inflation and a persistently tight labor market have forced investors to increase their forecast for peak interest rates to 6.01% by February 2024. In fact, the UK Office for National Statistics (ONS) reported that the headline UK CPI unexpectedly held steady at the 8.7% YoY pace in May, while core CPI - which excludes volatile energy, food, alcohol and tobacco prices - accelerated from 6.8% in April to the 7.1% YoY or the highest rate since March 1992.

This might hold back traders from placing fresh bullish bets and keep a lid on the EUR/GBP cross, at least for the time being. Hence, it will be prudent to wait for strong follow-through buying before confirming that spot prices have formed a near-term bottom ahead of the 0.8500 psychological mark and positioning for any further appreciating move