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  • EUR/GBP witnessed some short-covering move on the first day of a new trading week.
  • COVID-19 jitters undermined the British pound and remained supportive of the uptick.
  • A modest pickup in the USD demand weighed on the euro and capped gains for the cross.

The EUR/GBP cross maintained its bid tone through the mid-European session and was last seen trading around the 0.8910-15 region, below daily tops set earlier this Monday.

The cross witnessed some short-covering move on the first day of a new trading week and recovered further from November 2020 swing lows support, near the 0.8865-60 region tested on Friday. The British pound’s relative underperformance against its European counterpart could be solely attributed to the imposition of fresh restrictions in the UK.

That said, the optimism over the rollout of COVID-19 vaccines could lift any further losses for the sterling and cap gains for the EUR/GBP cross. In fact, the UK vaccine deployment minister, Nadhim Zahawi said this Monday that we are vaccinating 140 people per minute on average and everyone will be offered a vaccine by September.

Meanwhile, concerns about the economic fallout from the continuous surge in new COVID-19 cases weighed on investors’ sentiment. The risk-off mood drove some haven flows towards the US dollar and weighed on the shared currency. This, in turn, was seen as another factor that kept a lid on any strong gains for the EUR/GBP cross, at least for now.

In the absence of any major market-moving economic releases, either from the Eurozone or the UK, a scheduled speech by the Bank of England Governor Andrew Bailey might provide a fresh impetus. This makes it prudent to wait for some strong follow-through buying before confirming that the EUR/GBP cross has bottomed out in the near-term.

Technical levels to watch