• EUR/GBP gained traction for the fourth straight day and recovered further from one-month lows.
  • The post-Brexit issues between the UK and Ireland weighed on the GBP and remained supportive.
  • Sustained USD selling benefitted the shared currency and provided an additional lift to the cross.

The EUR/GBP cross maintained its bid tone through the mid-European session and shot to one-week tops, around the 0.8630 region in the last hour, albeit retreated few pips thereafter.

The cross built on last week’s rebound from over one-month lows, around the 0.8560 region and edged higher for the fourth consecutive session on Friday. The post-Brexit trade issues between Britain and Ireland turned out to be a key factor behind the British pound’s relative underperformance and provided a modest lift to the EUR/GBP cross.

On the other hand, the shared currency was supported by the prevalent selling bias surrounding the US dollar, which continues to be weighed down by dovish Fed expectations. That said, the upside seems limited amid the optimism over the third stage of the easing of lockdown measures in Britain and an upbeat outlook for the UK economic recovery.

The planned third stage of easing in the UK begun this Monday. Among other measures, people will be allowed to hug each other again and pubs and restaurants will be able to serve customers inside. The ban on foreign travel has also been lifted and replaced with new rules, though worries about the fast-spreading Indian variant remained.

This, in turn, continued acting as a tailwind for the sterling and kept a lid on any further gains for the EUR/GBP cross at least for the time being. Hence, it will be prudent to wait for some strong follow-through buying before traders start positioning for any further appreciating move amid absent relevant market-moving economic releases.

Technical levels to watch

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