EUR / GBP flirts with two-day lows, hovers above 0.8550

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  • EUR / GBP extends Friday’s losses and falls for the second day in a row.
  • Optimism about easing COVID-19 restrictions in the UK underpins the GBP.
  • The euro benefits from a subdued demand for the US dollar and helps limit the losses of the EUR / GBP.

The crossing EUR/GBP remains slightly lower during the first half of the European session on Monday and falls to two-day lows, around 0.8565 in the last hour.

The cross has seen some selling for the second day in a row on Monday and has extended the fall of the prior week’s retracement from levels above 0.8600, to two-week highs. The better relative performance of the British pound could be attributed to the optimism about UK government plan for final step of easing COVID-19 restrictions.

In fact, the Prime Minister of the United Kingdom, Boris Johnson, prepares to lift most restrictions in England on July 19. The UK government has said Johnson will outline the off-lock roadmap later on Monday. This, coupled with an upward revision to the UK services PMI, has acted as a tailwind for the British pound and put some downward pressure on the EUR / GBP cross.

On the other hand, The common currency has benefited from a subdued action in the price of the US dollar and has not appeared to be affected by softer investor sentiment in the eurozone as measured by Sentix. This, in turn, appears to be the only factor that offers some support to the EUR / GBP cross and could help limit any deeper losses, warranting some caution before positioning for any further declines.

From a technical perspective, repeated failures near a two-month-old downtrend line favor bears and support the prospects for an extension of the current downside. Some continuation selling below the 0.8565-60 region will reaffirm the negative outlook and make the EUR / GBP cross vulnerable to challenge the key psychological level of 0.8500.

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