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  • EUR/GBP gained some traction on Monday in reaction to fresh COVID-19 lockdown in the UK.
  • The euro bulls refrained from placing aggressive bets on the back of dovish ECB expectations.

The EUR/GBP cross surrendered a major part of its early gains to mid-0.9000s and now seemed to head back towards the lower end of its daily trading range.

The cross built on its bullish gap opening on the first day of a new week and reversed the previous session’s negative move to levels below the key 0.9000 psychological mark – the lowest since September 8. The downfall was exclusively sponsored by the British pound’s relative underperformance against its European counterpart, led by the imposition of fresh COVID-19 restrictions in the UK.

Britain’s Prime Minister, Boris Johnson on Saturday announced a lockdown until December 2 to curb the alarming pace of the rise in new coronavirus cases. Adding to this, a senior cabinet member said on Sunday that the lockdown could be extended, which, in turn, was seen as a key factor weighing on the sterling and driving the EUR/GBP cross higher through the first half of the trading action on Monday.

However, the latest optimism over increasing prospects of a soft Brexit, along with an upward revision of the UK Manufacturing PMI helped ease the intraday GBP bearish pressure. This, along with a softer tone surrounding the shared currency, further contributed towards capping the upside for the EUR/GBP cross, warranting some caution before positioning for any further appreciating move.

The euro languished on the back of concerns about the economic fallout from the coronavirus-induced lockdowns in the Eurozone’s two largest economies – Germany and France. Adding to this, the ECB’s explicit signal to ease further by the end of this year held the euro bulls on the defensive and kept a lid on any strong gains for the EUR/GBP cross, rather prompted some fresh selling.

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