EUR/GBP clings to gains near 0.8600, attention turns to Lagarde testimony

• EUR/GBP gains ground for the third session in a row and rises to a three-day high on Monday.
• Expectations of a less aggressive Bank of England and Brexit woes weigh on the British pound and support the pair’s move higher.
• The bulls seem reluctant and prefer to stay on the sidelines ahead of Lagarde’s testimony.

The crossing EUR/GBP has attracted some buying in the 0.8555-0.8560 area on Monday and has turned positive for the second day in a row. The momentum has made the pair break above the 0.8600 level again during the European session, although it lacks bullish conviction.

The relatively poor performance of the pound sterling could be attributed to expectations that the Bank of England will opt for a more gradual approach in raising interest rates. This, along with the impasse between the UK and the EU over the Northern Ireland protocol of the Brexit deal, further weighed on the British pound and acted as a tailwind for the EUR/GBP cross.

On the other hand, the common currency received some support from the emergence of some selling around the US dollar and the explicit signal from the European Central Bank that it would raise interest rates in July. However, nervousness over fragmentation risks prevented bulls from opening aggressive positions around the euro and capped gains in the EUR/GBP cross.

Investors also preferred to wait for the testimony of the president of the ECB, Christine Lagarde, before the Committee on Economic and Monetary Affairs of the European Parliament this Monday. Lagarde’s remarks will be key to influencing the common currency and reinvigorating the EUR/GBP cross amid the absence of market-relevant economic releases.

EUR/GBP technical levels