- EUR / GBP gains some positive traction on Monday and breaks a two-day losing streak.
- The problems of COVID-19 and Brexit continue to weigh on the British pound and offer support to the crossing.
- A moderate demand for the USD benefits the euro, which also provides an additional boost to the cross.
The EUR / GBP cross has spiked higher at the start of the European session on Monday, with the bulls looking to take advantage of the momentum above the 0.8600 level. At the time of writing, the pair has retreated slightly from its daily highs, but remains positive around 0.8595.
The cross has captured some buying near the 0.8570 region on the first day of a new trading week and, for now, it appears to have stopped last week’s rejection from the short-term downtrend line. A combination of factors has continued to act as a headwind for the British pound and has provided a good boost to the EUR / GBP cross.
Investors remain concerned that the UK could fully delay its plans to end restrictions in light of the spread of the so-called delta variant of the coronavirus. In the latest developments, UK Prime Minister Boris Johnson will make a statement on Monday.
The initial plan was to reopen the economy completely on June 21. The delay has diminished the prospects for a rapid UK economic recovery from the pandemic. This comes amid the collision between the EU and the UK over the Northern Ireland protocol, which has been seen as another factor that has further contributed to the poor performance of the British pound against its European counterpart.
In a showdown over the Northern Ireland protocol, the EU warned of swift and firm action if the UK fails to meet its post-Brexit obligations. In addition to this, French President Emmanuel Macron said that Northern Ireland is not part of the United Kingdom. This, coupled with a modest rally in the common currency, has provided an additional lift to the EUR / GBP cross.
The US dollar has been consolidating Friday’s strong move higher, as investors appear reluctant to open aggressive positions ahead of the June 15-16 FOMC meeting. This, in turn, has been seen as a key factor that has benefited the euro. The combination of factors has allowed the EUR / GBP cross to break two consecutive days of losing streak.
Technical levels to observe
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