• A responsive buying activity has pushed the cross to near 0.8520.
• Fears of recession in the UK have brought an intense sell-off for pound.
• An embargo on oil imports from Russia by Europe looks certain.

The EUR/GBP pair has recovered half of its intraday losses as investors have started dumping sterling on bolstering fears of a recession in the world’s fifth-largest economy, the UK. The pound bulls are experiencing broader weakness after the Bank of England (BOE) raised its interest rates by 25 basis points (bps) to 1%.

The announcement of the interest rate hike by a quarter to a percent came with a 6-3 majority while the minority were advocating for a 50 bps interest rate hike. The BOE is expecting that inflation could climb to 10% going forward. Although every economy is facing the headwinds of soaring inflation, the catalyst that has weakened sterling is the statement by BOE Governor Andrew Bailey that UK corporate are unable to create jobs now, which is a major issue for the central bank now rather than the ramping up inflation. Households are facing a higher living cost crisis, which is affecting consumer confidence. Going forward, the speech from BOE’s monetary policy committee (MPC) member Dr. Catherine L Mann will remain in focus.

On the euro front, investors are still gauging the names of oil suppliers who would cater to the daily requirement of 3.5 million barrels of oil by Europe, earlier which was being addressed by Moscow. The embargo on oil imports from Russia is on the cards and its quick prohibition may raise the odds of sheer unemployment and stagflation in Europe. Next week, euro investors will focus on the release of economic growth forecasts by the European Commission (EC).